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Copper races up $150, others follow. Is there no stopping this boom?

03/02/06

In the absence of news copper managed to rally $150 with the other metals, except nickel, screaming higher too. Although it is hard to fathom out the extent of the bullishness, there is no denying that the bulls are still firmly in the driving seat. The speed of the move in copper suggests a certain amount of short-covering, which may have been prompted by the London Clearing House’s decision to hike initial margins, but overall fresh fund buying is thought to be primarily behind the move. Although it is easier to understand the likes of zinc and aluminium continuing their rally because the fundamentals look set to tighten further, it is more difficult to justify the continuing rise in copper. However, in the end it seems that it is the weight of money that is fuelling the bull run and with liquidity flowing freely there seems no shortage of money looking for a home.

Needless to say the markets are in a vulnerable position and dips are likely to become more frequent, but until something happens to change the mind-set of the funds, there is no saying where the rally will end. However, the more parabolic prices become the more likely it is that physical trade will fall off along with volumes, which is likely to lead to an unsustainable spike as the last shorts throw the towel in. In the wider markets activity also seems to be getting more nervous. The fact that a scandal at a Japanese internet company a few weeks ago can send ripples around the world and across different markets suggest the whole investment arena has become more intertwined than is normal, or healthy. The Dow is becoming more erratic and hasn’t been trending since December and oil has started to correct, falling over 6 percent in two days.

Today is a busy day for US data, the key employment data is expected to show a strong jobs market with non-farm payrolls expected to add 275,000 jobs, the unemployment rate is expected to remain unchanged at 4.9%. Consumer sentiment is expected to come in unchanged at 93.4, factory orders are set to rise 1% and ISM business activity index is expected to read 59.7.

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