Got to wonder when the bargain hunters will emerge in the commodities market. Especially in the market for base metals such as copper, zinc, and nickel.
Copper is down 24% from its April high. Zinc is down 38% and nickel 34%.
Selling has been driven by fear that the global economy is slowing and that China is cutting back on purchases. Copper tends to closely track China’s financial markets and the global economy since so much of the demand for the metal comes from the construction and manufacturing sectors.
Traders have also been selling in the belief that they’ll be able to re-establish positions later at a lower price.
So when will buyers emerge to pick at these bargains?
It looked like buying interest was picking up last week—until Friday when the horrible U.S. jobs number—only 41,000 private sector jobs created in May—raised worries about U.S. and global economic growth to a new height.
In my opinion base metals won’t start to recover until fear starts to recede—even if copper at a price of $6,125 a metric ton on the London Metal Exchange yesterday is at an eight-month low. That makes the price of copper, especially, a good indicator of the balance of fear and greed in the financial markets.
Right now fear is way ahead.