A Falling Market

There seems to be no let-up in the selling we are seeing in the commodity markets. The market continues to remain quite low with some days remaining modest and even and other days declining severely. In addition, there are a few places to hide, as oil, base metals, precious metals and even the agricultural commodities are all joining the retreat. Currently there is a mixed tone in metals but a few important milestones have been reached. On July 31st, copper hit a fresh low for 2015, getting down to $5191, a six year low for itself. Cash aluminum prices breached the $1600 mark and the gold is now off another $16/ounce despite an RSI reading of below 20. This proves the point that technically oversold as a commodity is, it is best to let the market put in a bottom instead of guessing where it might be.

Miners are also in trouble with these continuously low markets leading to market value decline as well. Mining-dependent companies are facing problems with this as well as their stocks fall along with the market.

Most of this falling market can be explained by China’s change in metals consumption. As a growing industrial country in the past it was continuously the major consumer of metals until recent moderations and even declines in its consumption. The trend is all the more alarming given that the supply picture has remained largely accommodative, with output of steel, copper, and aluminum all running well ahead of what the market can bear. China’s economy is stalling on the manufacturing side meaning that we may not be seeing much relief in the future. Although China is not as active as it has been in the past, Japan is climbing as a consumer for metals, hopefully with others following in the future.

The dollar to euro exchange rate remains fixed in the 1.10 area. Any continued strength in the dollar could further lower metal prices across the board.

Copper is at $5236, down $36 and trading between $5191-$5278.