At a press conference held by the National Development and Reform Commission in June yesterday, Meng Wei, a spokesman for national development and reform, responded to the sharp rise in commodities. Meng Wei said that in recent months, some commodity prices have risen significantly, the increase significantly deviated from the fundamentals of supply and demand, beyond the reasonable range of restorative growth. With regard to this phenomenon, in accordance with the decision-making and deployment of the CPC Central Committee and the State Council, the National Development and Reform Commission, together with relevant departments, acted quickly and adopted multiple measures, and achieved preliminary results.
"through a series of measures, judging from the current situation, market speculation has begun to cool down, and the prices of some commodities, such as iron ore, steel and copper, have fallen to varying degrees." Meng Wei said.
Meng Wei said: in the next step, the National Development and Reform Commission will thoroughly implement the arrangements of the executive meeting of the State Council, work with relevant departments to do a good job in the implementation of various key tasks, especially closely monitor market and price changes, increase revenue and reduce expenditure through various channels to maintain a dynamic balance between supply and demand, strengthen supervision over the spot market, and maintain normal market order. At the same time, efforts should be made to do a good job in the organization and implementation of commodity price regulation policies for people's livelihood, establish and improve relevant mechanisms, enhance the ability and level of price control, and ensure the basic stability of supply and prices in the commodity market for people's livelihood.
Gao Feng, a spokesman for the Ministry of Commerce, also responded to questions about commodity price volatility at a regular press conference held by the Ministry of Commerce yesterday. Gao Feng said that since the beginning of this year, commodity prices have generally risen, further increasing the pressure on foreign trade companies in areas such as raw material costs. The Ministry of Commerce and other relevant departments have conducted extensive research on this. Recently, the Ministry of Commerce, together with relevant departments, has conducted an in-depth survey of 7500 foreign trade enterprises through the foreign trade and foreign investment platform, and has, together with relevant departments and localities, taken some measures, such as promoting import diversification and building stable trade channels for commodities.
Feng pointed out that in the next step, on the basis of consolidating and upgrading the policy effects of export credit insurance and credit support, we will continue to track commodity price trends and the production and operation of foreign trade enterprises, and further optimize and improve the trade policy toolbox. We will help foreign trade enterprises to reduce costs and expand the market, and support the stable and healthy development of all kinds of foreign trade enterprises, especially small and medium-sized foreign trade enterprises.
Precious metals collectively tumbled after the Fed confirmed its expectation of raising interest rates. Last night, COMEX silver futures tumbled 6 per cent in intraday trading. The main contract of the Shanghai Bank fell by more than 4%. COMEX gold fell below $1770 an ounce, down 4.83 per cent on the day. Palladium futures fell 10% to $2554 / oz in the day, while spot palladium fell 8.32% to $2560 / oz.
In addition, demand for reverse repo jumped to a record high after the Fed decided to raise the overnight reverse repo rate. On Thursday, 68 counterparties put $756 billion into the Federal Reserve through overnight reverse repos, setting a record high of $584 billion.
As of the close this morning, COMEX August gold futures closed down nearly 4.7%, the lowest closing price of the main contract since April 30 this year. New York silver futures also fell sharply, with COMEX July silver futures closing down 7% at $25.86 an ounce, the lowest since April 20. Platinum fell for three days in a row, while NYMEX July platinum futures closed down 7.6 per cent. Palladium ended two days of continuous gains, NYMEX September palladium futures closed down $324.6, or 11%, the biggest decline since March last year.
The futures of agricultural products and non-ferrous metals fell sharply across the board, with American beans down 6.82%, American soybean meal down 4.49%, American soybean oil down 8.86%, American sugar down 2.33%, and American cotton down 2.20%. Us corn fell 6.82%; Maimai fell 3.72%. Lun copper closed down 3.64% at $9316 a tonne, the lowest since April 16. Copper for delivery in new York closed down 4.7 per cent, down more than 8 per cent this week. Aluminum fell 4.41%, zinc fell 4.45%, and Lenny fell 2.25%.
Founder medium-term futures analyst Shi Jialiang told Futures Daily that for gold, US bond yields and dollar index have become the core drivers of the gold and silver market. New policy trends will continue to drag on gold, and the core range of gold prices in June is expected to remain at $1750, 1900 per ounce or 360, 390 yuan per gram. Gold will remain weak after falling below the key position of $1800 / oz. The support level below June has been adjusted to around $1750 / oz. In the second half of the year, there is the possibility of falling back to the $1650 / oz range again, while the possibility of reaching $1900 / oz again is relatively small.
The State Reserve Copper will be put into multiple batches, and nearly 600 million yuan of funds will flow out from the main contract of Shanghai Copper.
At a press conference held by the National Development and Reform Commission yesterday, Meng Wei said that the State Grain and material Reserve Bureau would soon organize the release of national reserves of copper, aluminum and zinc, saying that the launch was aimed at processing and manufacturing enterprises in the middle and lower reaches, with open bidding and tilting towards small and medium-sized enterprises as far as possible in terms of participation conditions.
Meng Wei further said that in the coming period of time, in conjunction with relevant parties, multiple batches will be launched in a timely manner according to market changes, so as to increase market supply in a timely manner, ease the pressure on enterprises' costs, and promote prices to return to a reasonable range.
It is worth noting that on the 17th, Shanghai copper futures encountered a large capital outflow in the morning. According to Mandarin financial data, as of November 30, the main contract of Shanghai copper futures encountered a capital outflow of 738 million yuan in the morning, becoming the commodity with the largest capital outflow in the morning. By the close of trading yesterday afternoon, the main contract funds of Shanghai copper futures had outflowed nearly 600 million yuan.
Copper for three-month delivery on the London Metal Exchange (LME) fell more than 3 per cent to $9360 a tonne last night.
Zhang Weixin, senior research fellow of CITIC Construction Investment Futures, said in an interview with Futures Daily that there are many reasons for the decline in copper positions in Shanghai, the most fundamental of which is the increase in uncertainty and the tendency of long and short sides to be cautious.
Since the beginning of June, as we approach the delivery date, the total positions in Shanghai copper contracts from June to December this year have shown a downward trend. From a bullish point of view, there has been no major adjustment in the market since March 2020, and investors who have held multiple orders for a long time have made a lot of profits. in addition, the risk of current policy regulation has increased, the market is more bearish, and it is expected that the homeopathic profit will stop. As copper prices fell, the bulls continued to reduce their positions and leave the market. From the short point of view, even if the copper price has been in a weak pullback state, the short sellers still do not dare to be bearish on a large scale. " Zhang Weixin said that the trend of the K-line and changes in positions in Shanghai Copper on the 17th reflect that the market has not yet formed a consistent bearish expectation, and that there are differences in the duration and space of the downside.
With regard to the news that the State Reserve Bureau has directly dumped multiple batches of deposits to enterprises in the middle and lower reaches of the country, founder medium-term Nonferrous Metals and Precious Metals researcher Zeng Junhui believes that due to the fierce competition in its own copper downstream terminal product market, especially the relevant small and medium-sized enterprises have to bear the pressure of rising costs and insufficient funds, so the batch release of copper by the State Reserve will effectively ease the tension in the spot market and the pressure on downstream entity enterprises.
"as far as copper prices are concerned, the State Reserve Bureau's approach or the signal not to over-speculate speculative funds will promote copper prices to return to reasonable prices, and some speculative funds will obviously flow out." Zeng Junhui said.
Looking to the future, Zeng Junhui said that the current valuation premium for copper is still high, with factors such as the commissioning of new overseas mines, the off-season of domestic downstream demand, the difficulty of landing US infrastructure plans and the signals from the Federal Reserve's hawkish attitude, copper prices still have some room to fall in the future.
Zhang Weixin believes that due to the current negative dominance, the overall trend of Shanghai copper is expected to be weak in the short term, but not too pessimistic in the medium and long term. Specifically, the quantity and price of reserves are still uncertain and will continue to exert pressure on copper prices; at the same time, the Federal Reserve has raised the interest rate on excess reserves and the reverse repo rate, which will strengthen the interest rate on US debt and the dollar index. it will also put great pressure on the financial properties of copper. However, it is still supply and demand that ultimately determine the trend of copper prices, so the adjustment of copper prices is expected to continue in the short term, but there is no need to be overly pessimistic.
As the Federal Reserve raises inflation expectations, monetary policy may begin to normalize.
At 2: 00 a.m. in Beijing on June 17, the Federal Reserve released interest rate decisions and policy statements, economic expectations and lattice maps.
"the Fed's interest rate meeting in June was generally partial to the eagle. Although the policy of easing remained unchanged, it raised the interest rate on excess reserves and the overnight reverse repo rate. For the first time, it was expected to raise interest rates twice in 2023, and the expectation of raising interest rates was advanced again. Overall, it strengthened the market expectations that monetary policy is about to turn, and monetary policy entered a transition period." Shi Jialiang said.
Wei Gang, chief economist of Hengtai Futures, also said that inflation in the United States has been higher than expected for two consecutive months and will remain high. Two factors determine that the Federal Reserve will begin to reduce QE, in the third quarter. This interest rate meeting is already doing the expected management of reducing QE, marking the beginning of the normalization of monetary policy. Although the bitmap shows that the probability of raising interest rates is higher, the time of raising interest rates is later than the reduction of QE,. There is a high probability that interest rates will not be raised this year.
As for the timing of the Fed's shrinking schedule, MATT WELLER, global head of research at Carson Group, believes that the Fed is closer to the table than ever before. After this meeting, there may be a risk that the Fed will announce a shrinking schedule at the FOMC meeting in July, and Powell may also use the July meeting to hint at future shrinking schedules. "I predict that the approximate timeline may be that the Fed may announce a timetable for shrinking at its FOMC meeting in July and August, formally starting in the fourth quarter, lasting at least until the middle of next year, and as the contraction reaches a certain level, the Fed will start to raise interest rates." He said.
