Daily Commodities: Copper Falls Amid Recession Worries
Key Insights
- Weak economic data from China had a significant negative impact on copper markets.
- Oil continues to pull back at the start of the week as traders remain worried about the strength of oil demand in the second half of the year.
- Gold made another unsuccessful attempt to settle above the key $1800 level.
Copper
Copper is under significant pressure after the release of the disappointing economic data from China. Coronavirus-related measures had a negative impact on the Chinese economy, putting pressure on Industrial Production and Retail Sales.
The slowdown in China is bad news for commodity markets. Copper has immediately found itself under pressure as China is the biggest consumer of copper.
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China’s financial authorities are worried about the slowdown, so the country’s central bank cut key rates to provide support to credit demand. However, such measures cannot have an immediate impact on demand for commodities, so copper markets will need additional upside catalysts to get back to their recent highs.
Oil
The disappointing data from China has also put pressure on WTI oil and Brent oil. Recession worries were the key driver behind the recent pullback, so bad news from China will serve as an additional bearish catalyst for oil markets.
The ongoing Iran nuclear deal talks may serve as another catalyst for the oil markets today. Iran has just signaled that there is an opportunity to revive the deal if its “red lines” are respected.
It remains to be seen whether Iran is serious about working to revive the deal, but any news about Iran nuclear deal talks may put more pressure on oil markets.
Gold
Gold has recently made another attempt to settle above the important $1800 level but faced strong resistance and pulled back. The U.S. dollar has started to move higher against a broad basket of currencies at the start of the week, putting some pressure on gold markets.
Gold traders will also have to monitor the dynamics of Treasury markets. The yield of 2-year Treasuries has stabilized near 3.25% and is trying to gain additional uspide momentum.
In case the yield of 2-year Treasuries manages to settle above 3.30%, it will have a good chance to get to the test of the yearly highs near 3.45%, which will be bearish for gold.
For a look at all of today’s economic events, check out our economic calendar.