China's Copper Buying Frenzy Is Not Over Yet

Includes: JJC, JJCC
by: Katchum

At the London Metal Exchange (LME) the copper stock levels keep declining as can be seen on following graph:

LME copper warehouse

LME Copper warehouse level

Click to enlarge

The Chinese were importing copper at record levels during December 2011 to restock their inventory. There has been a concern that in 2012, there will be a copper deficit, which resulted from this buying frenzy.

As a result we can see that since September 2011 the copper price was going up, just at the same time that LME stock levels were going down.

copper price

Click to enlarge

I can't blame the Chinese to buy copper, they want real assets and not some US government paper, which they are dumping as can be seen on following graph:

China US treasury

China US treasury holdings

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I think the buying frenzy is not over yet, as China is positioning itself to create competition against the London Metals Exchange in June 2012. On that date China will open the Pan Asia Gold Exchange, challenging the LME and COMEX.

I predict that gold and silver will explode on that event. Interesting times will emerge later in 2012, so prepare accordingly by buying precious metals.

Disclosure: I am long PSLV, PHYS.