• Copper rose strongly in the current month up by almost 13 % on LME with strong investment flows, driven by hopes of a growing deficit. 
• The metal’s 3-month futures went above $10,000/mt this morning. However, profit-taking followed immediately pulled prices back lower.
• Spikes in prices have also been attributed to index funds, ETFs and several chart-based traders taking bullish positions in Copper.
• On the other hand, the physical market is surprised to see such a rally. SHFE inventories remain at 4 year high, local premiums have dropped to nearly zero (from $50-60 / mt in Jan) and the import arbitrage window has closed down.
• Charts suggest minimal resistance from the selling community. Fund inflows are so strong that they are ignoring poor Chinese IP, contracting flash PMI and weak US GDP data.
• Goldman Sachs expects Copper prices to reach $12,000 in 12 months.
• Major energy trading firms like Vitol, Gunvor, and Mercuria are re-entering the metals market, attracted by rising profits and optimistic forecasts for copper, aluminium, and other metals.
• However, given the involvement of investment funds, metal prices could remain highly volatile and sensitive to events, data and statements.

Outlook

• China will release its April PMI tomorrow, the US PCE inflation suggests Inflation remains brisk in March which could keep the dollar on the front foot this week.
• Meanwhile US Fed meeting due this week could also be in focus on indications of the trajectory of rate cuts to drive volatility in the dollar index.
• Copper’s long positions on LME surged by 8% and now stand at 89,365 lots (highest in nearly a decade). Likewise, the bearish positions also increased slightly (by 2%) to reach 39,207 lots during the last week. The bull-bear ratio of the metal is at 2.30, showing a strong bullish dominance over the metal.
• According to CME’s COTR for the third week of April 2024, copper bulls have decreased their positions by 4%, and now amount to 1,15,431 lots. Likewise, the bearish positions have dropped significantly (9%) in the reported week indicating spikes driven more by short covering moves which offset long liquidation.
• Technically MCX Copper looks strong on charts for the week (CMP Rs. 862 per Kg. in June contract) Supports are expected around 853 – 848 per Kg for the week a daily close below which only downside momentum can occur up to Rs. 836 – 827 per Kg. Meanwhile, the upside momentum can still drive the prices higher up to Rs. 880 – 888 per Kg on MCX.
• A breach of key resistance around Rs. 888 per Kg. daily could even drive prices higher up to Rs. 900 per Kg in MCX’s June contract.