What Is Copper Saying?

Copper Advances for Second Day on Speculation Supply May Lag Behind Demand

From Bloomberg:

Copper climbed for a second day, trading near a 26-month high, on speculation supply may lag behind demand as the consumption outlook improves in China, the world’s largest user. Nickel advanced to a five-month high.

Copper for three-month delivery on the London Metal Exchange gained as much as 0.6 percent to $8,149.75 a metric ton, and traded at $8,145 at 9:27 a.m. Singapore time. The contract rose as high as $8,178 a ton on Oct. 1, the highest level since July 22, 2008. Futures for December-delivery on the Comex in New York added as much as 0.6 percent to $3.7115 a pound. The Shanghai Futures Exchange is closed till Oct. 7 for the National Day holiday.

China will address “structural problems”
and stabilize its economy by increasing domestic demand, Premier Wen Jiabao said in an interview with CNN yesterday. Wen also said he’d argued before the global recession that China’s economic development “lacks balance, coordination and sustainability.”

China is still either not contributing very much or is a drag on global apparent demand growth for metals at the moment, but this is unlikely to last given the current levels of demand in end-use sectors, for which growth is set to remain robust,” Macquarie Group Ltd. analysts including Jim Lennon wrote in a Oct. 4 report. “This should mean that China is again likely to increase apparent demand whilst the rest of the world is slowing.”


What is Doctor Copper telling us with its latest move to near record levels?

On the surface, it appears that demand is fairly strong with potential to increase further, particularly in Asia.
From a technical point of view, Copper is past is 76% Fibonacci level, and a Golden Cross has just formed in September.

Yet, something does not see right in the world of commodities.
Can Emerging Markets carry on rapid growth rates while Mature Markets Languish in the doldrums? In particular, how can the Chinese export machine adapt to lower levels of consumption in the US, Canada, and Western Europe?

From a technical standpoint, the only potentially negative indicator is the high RSI reading - now over 70.

I suspect, that tremendous speculation has driven the price of both copper and crude oil well above normal supply and demand values.