Searching for a gold bottom for my mining equities, I was surprised to see some copper strength this May 12th morning, and even more surprised to see the gold price trying to turn positive for the day. I was not aware of any copper to gold relationship, but I suppose it is all part and parcel of the commodities trade.
Today, it seems copper was the early mover, turning green in the early morning and it seems to be dragging gold along with it.
In the copper markets, it seems that there are large copper stocks that have been imported into Shanghai bonded warehouses. As they have not yet been sold, and VAT taxes have not been paid, they may just be speculative holdings. However, as reported by Reuters recently, these stocks are now being utilized by the Chinese customers, and the markets may be anticipating a upcoming summer demand happening. Therefore the move of the copper price upwards this morning as the Shanghai warehouses are in the process of being de-stocked.
"Given the magnitude of the pullback, it does create an opportunity for more upside potential,"Goldman Sachs said. A month ago, the bank told investors they should be "underweight"in commodities. Copper fell 4.9 percent last week.
Whatever the cause or case, I will accept, as I am still of the opinion, that there will be a higher peak for the gold and precious metals prior to the summer doldrums. Just to be sure, something was happening here, I checked the status of the GDX ETF of major gold miners as in the chart following:
Lo and behold, will the markets hold ever more surprises; the gold mining equities as represented by the GDX are green for the day even as the GLD is still struggling to turn positive. Are there changes afoot in the markets? Is the lagging of the gold mining equities to the gold prices coming to an end? Are the gold miners finally taking advantage of the higher gold prices to turn up on their bottom line? Are the funds finally picking up on the fact that the gold miners are now bargains?
I am presently long Goldcorp, the darling of the gold miners, and will be watching the markets intently for the answers.
Disclosure: The author is long Goldcorp (GG).
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