Overall risk sentiment soured, with the VIX fear index surging 35 percent to an intraday high of 25.09, underscoring concerns about rising inflation and the spread of Delta and Ramda-variant viruses. In fact, two-thirds of the 30 countries monitored by the European Center for Disease Control and Prevention have seen an increase in the epidemic, so not only the US stock market fell sharply yesterday, but even the European stock market also closed sharply lower.
While our understanding of the mutated virus is limited, from a market perspective, investors’ fear of heights can also be seen in yesterday’s 8% drop in WTI crude oil and the strength of safe haven currencies such as the Japanese yen, Swiss franc and dollar. Commodity prices were also under general pressure yesterday, with LME copper falling to a session low of $9,131.4 and below the $9,200 level. Gold fell nearly $20 at one point to a one-week low of $1,795.
Asia Pacific stock markets are also generally under pressure in the day, the global market is generally frustrated under the short-term market risk sentiment is expected to be difficult to improve quickly. However, Tuesday’s announcement that China’s LPR offer has remained unchanged for 15 consecutive months still soothed market sentiment somewhat. In the face of the PBoC’s full RRR cut earlier, the renewed 100 billion yuan MLF and the unchanged LPR offer both indicated the intention to maintain reasonably ample market liquidity, which eased some market concerns.
There is no doubt that China’s appetite for commodities will have a big impact on commodity prices. However, we have also noted that the National Development and Reform Commission and the National Food and Reserves Administration are successively unloading stockpiles in batches. On July 5, the first batch of state stockpiles totaled 100,000 tons, including 20,000 tons of copper, 50,000 tons of aluminum and 30,000 tons of zinc. According to the State Reserve Bureau said yesterday, the second batch of copper, aluminum, zinc reserves continue to carry out, to further ease the pressure of production and operation of enterprises.
So while a stabilising Chinese economy is helping to stabilise demand for copper, an increase in supply is still pressuring prices. Going forward, the focus will remain on expectations of monetary policy changes in the world’s two largest economies due to the lack of important data this week, with investors looking to see how data on inflation and the labor market will play out. Copper, on the other hand, is expected to remain in the $9,200-9,600 range this week as long-term demand for power transmission, light vehicles, electric vehicles and consumer goods will provide support as copper fundamentals remain sound.
Daily chart of copper price
The daily chart shows LME copper holding steady above $9,200, while the overall pattern remains in the $9,200-9,600 range. However, the overall direction of the session remained on the downside, given that copper prices had traded sideways during the previous rally cycle, suggesting a lack of further upside momentum. If copper prices subsequently fell below $9200, is expected to further down the test of support around $8900.
July 20 gold action: $1800 recovered, but the upside will be limited in the short term
The hourly chart shows that gold broke through $1810 yesterday after falling back to test support below the $1795- $1800 area, in line with my expectations. Gold has now regained the $1,810 level, suggesting the metal is still in a rally cycle overall. However, considering the complexity of the current trend, gold is expected to be limited in the short term upside, is expected to present a shock upside pattern. Once gold can effectively stabilize above $1815 after the end of the phase consolidation, there is still the possibility of another rally to challenge $1830 or even $1850 level.
Reprint indicated source：Spark Global Limited information