Commodities Correction?
I have been so used to commodities running like the bulls of Pamplona that I almost missed the following red flag in briefing.com this morning:
“Copper (132.40 -12.40) prices plummet the most in eight years as signs of slowing growth in China surface.”
It is of course far too early to call the top, but news like this usually helps remind folks how fickle the commodities markets can be. Typically, the players in these markets are always nervously looking out for the top of the economic cycle and run for the exits as soon as they get even a whiff of trouble. Indeed, I believe all sorts of commodities are selling off this morning…including my pet favorite gold. It is also too early to call a top because often times strong bull markets are marred by sharp, swift, and deep corrections (at least that’s what I heard somewhere…!)
Regardless, this is yet another signal to keep an eye on. The implications? For starters, slower growth in China relieves inflationary pressures on raw goods and will help keep the Fed at ease. The plot thickens!



















This post has 5 comments
October 13th, 2004
Mike,
I think the strength in the U.S. Dollar with the pull-back in oil prices has temporarily pulled down the metals, including gold.
Copper traders may be worried about slowing economic growth (for whatever reason, China included), but gold is an entirely different market.
I issued an Accumulation recommendation on NEM today, with this weakness. My tactic is to write puts. If I see a downward price spike, I will change the recommendation to Buy, and I’ll go long (~90-day) calls.
Keep up the good work on your popular blog.
/Bill
October 13th, 2004
Thanks, Bill. You are completely correct. I hinted in my post that gold is my pet favorite. I *love* these dips in gold… (FYI - I am still guest writing in Mike’s absence).
October 14th, 2004
Your Flash call was perfect.
October 14th, 2004
Sometimes it’s better to be lucky than good! That was one of those time that the market was actually waving the red flag for everyone to see…
October 20th, 2004
Hey Bill…gotta love the quick snapback on gold, eh?