The Dow Jones-UBS Copper Subindex Total ReturnService Mark is a sub-index of the Dow Jones-UBS Commodity Index Total ReturnService Mark and reflects the returns that are potentially available through an unleveraged investment in the futures contracts on physical commodities comprising the index plus the rate of interest that could be earned on cash collateral invested in specified Treasury Bills. The index includes the contract in the Dow Jones-UBS Commodity Index Total ReturnService Mark that relates to a single commodity, copper (currently the Copper High Grade futures contract traded on the COMEX).
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Goldman Sachs makes the case for holding commodities as a strategic move. On Brent crude, the market should be well supplied in H2 as significant non-OPEC supply comes online and weak Chinese trade data signals relatively weak demand. Gold prices should decline to $1,050/oz. by year-end 2014 given a less accommodative Fed. Potash producers will maintain discipline and good margins despite falling crop prices.
Gold's ahead 3% and Silver 5% following Bernanke's dovish remarks last night. GLD +2.9%, SLV +5.3% premarket. The devastated miners look to catch a big opening bounce as well, GDX +5.4%. Copper (JJC) +3.5%.
More on gold (previous): The sell side is bailing fast. Deutsche Bank cuts metals forecasts across the board, including gold and silver (SLV), citing the slowdown in China and the turn in the U.S. interest rate cycle. Reading the same newspapers, Credit Suisse follows suit. Having already slashed gold, Goldman moves on to copper (JJC), lowering both its near-term and longer-term outlooks on China growth worries.
Copper futures rise (JJC) after Freeport McMoRan (FCX +1.8%) declared force majeure at Indonesia's Grasberg mine, underscoring the potential for tighter supplies this year. Still, gains are muted as traders anticipate new copper supply to come on line as the massive Oyu Tolgoi mine in Mongolia ramps up output to commercial levels.
Rio Tinto (RIO) plans to start exporting copper from the $6.2B Oyu Tolgoi mine in Mongolia on Friday, Reuters reports, marking the opening of a mine that will eventually make up one-third of the country's economy. For Rio, it is particularly important now as its Bingham Canyon mine in Utah was shut by a landslide in April and its 40%-owned Grasberg mine in Indonesia has been shut following an accident in May.
Copper rallies (JJC +1%) on expectations of tighter supplies, as the potential rises for an extended shutdown at Freeport McMoRan's (FCX -2.5%) Grasberg copper and gold mining operation in Indonesia. If FCX were to declare force majeure, the shutdown could remove 100K-150K metric tons of copper supply from the market, a sizable chunk out of estimates of 600K-800K metric tons.
Beijing returns to metals. Maybe taking advantage of tumbling prices, or maybe showing confidence about the future, China's State Reserves Bureau has purchased base metals on the international market for the first time since the global financial crisis. The agency bought about 30K tons of nickel (JJN) - about one-sixth of LME stockpiles - according to sources, and has been making inquiries about copper (JJC). Other ETFs of note: LD, JJT.
Leaders of Indonesia's miners union say they will call on workers not to return to Freeport McMoRan's (FCX +2.3%) Grasberg complex until an investigation behind the tunnel collapse that killed 28 people is completed. The news means copper production could be sidelined for several more weeks, increasing pressure on an already tight market.
JPMorgan's commodities team slashes its price forecasts for most metals, lowering the 2013 estimate for gold to $1,595 from $1,745. The 2015 estimate is cut 5% to $1,650. Silver's 2013 outlook is cut to $27.89 from $30.01. Copper (JJC) to $3.50 to $3.64. GLD -0.1%, SLV -0.3% premarket.
The tunnel collapse that killed four miners should barely impact global copper supply (JJC) but may spark long-term issues for Freeport McMoRan (FCX +1%), Goldman Sachs says. The shut area represents ~1% of FCX's Indonesian production, but the tragedy could mean strained relationships with unions, tighter government regulation, and questions about a transition of the Grasberg mine from open pit to underground.
China has temporarily halted 1M metric tons/year of primary aluminum (JJC) capacity YTD and could cut another 300K tons capacity before year-end if metal prices remain low, but it won't solve the global glut, CRU consultants say. China is producing at a rate of 24M tons/year of aluminum; its share of global production will exceed 50% by the end of the decade, when it could reach 42M tons - "quite scary," CRU says. (earlier)
The dollar (UUP +1%) is soaring across the board (not just against the yen, where it's now spiked through ¥100 to ¥100.56). The greenback is threatening parity vs. the aussie (FXA -1.1%) for the first time since last summer, and the euro (FXE -1.1%), swissie (FXF -1.4%), loonie (FXC -0.5%), and pound (FXB -0.6%) are seeing sizable declines as well. Commodities? Red. Gold (GLD -1.1%), Silver (SLV -1.2%), Oil (USO -0.6%), Copper (JJC -0.8%).
Today's jobs report helped juice copper (JJC) prices, which soared 6.8% to stage their biggest single-day gain in 18 months. But copper is still ~10% lower YTD, and perma-bear Al Edwards continues to trust in its ability to serve as an economic indicator. The metal is giving "an early warning that liquidity will not save risk assets: it's time to get out of equities," he warns.
Commodities are lit up bright red as weak economic data (here and in China) is a good excuse to end the bounce of the last few sessions. Gold (GLD -1.8%), Silver (SLV -3.6%), WTI Crude (USO -2.6%). Copper (JJC -3.3%) moves to its lowest level in about 18 months at $3.08/lb. The metal hasn't had a 2-handle since the start of 2011. Broad commodity gauge (DBC -1.8%).
The fundamentals remain in place to support copper prices, Southern Copper (SCCO +0.4%) says in its earnings conference call. After its Q1 average price for copper fell ~4.5% Y/Y, SCCO expects a recovery in copper prices on stronger demand, particularly from Asia, in upcoming quarters; it maintains its full-year production guidance of 650K tons of copper.