Gold is heading for its biggest weekly gain since March after the weaker-than-expected CPI print gave metals, including silver, a major boost from the subsequent drop in yields and the dollar. The yellow metal traded up 7% during the past two weeks after once again finding support in the $1615 area, now a triple bottom. Whether the break above resistance-turned-support at $1735 now signals a change in the trading behaviour among speculators from sell-into-strength to buy-on-weakness remains to be seen.
Copper traded near a five-month high, with the +12% gain during the past two weeks being supported by a weaker dollar and the prospect of China showing willingness to support economic growth by allowing Covid restrictions to be eased despite seeing infections increase to the highest level since April. With the global economic outlook still clouded by the prospect of recession hitting some economies, the potential for a sustained recovery at this stage is probably still too early to call. For now, traders and investors responding to higher prices by reducing negative biased positions.
The copper intensive electrification of the world will continue to gather momentum, following a year of intense weather stress around the world and the need to reduce dependency of Russian produced energy from gas, oil and coal. But for power grids to be able to cope with the extra baseload, a massive amount of new copper intensive investments will be required over the coming years. In addition, producers like Chile, the world’s biggest supplier of copper, struggling to meet production targets amid declining ore grade quality and water shortages. China’s slowdown is viewed as temporary and the economic boost through stimulus measures are likely to focus on infrastructure and electrification – both areas that will require industrial metals.