Key Macroeconomic Indicators for Base Metal Prices (2015-12-14)

SHANGHAI, Dec. 14 (SMM) – US Fed is expected to be well on the tract to raise interest rate in December but supportive news from China will likely bode well for base metals.

Both speeches delivered by US Fed’s officials and reports released by major banks show signals of rate hike in December. Nonetheless, US dollar accumulately retreated by 2.5% in the recent two weeks and fell to near the 60-day moving average from above 100. But focus is now turning to Fed’s rate hike path from the timing of the hike. Thus, recent falls in dollar will provide enough room for its rally later after Fed really raises rate in December.

Supportive factors from China, including metal output cut and stockpiling, will lend support to base metals when combined with domestic high positions and low inventories .

Based on macroeconomic figures, Chinese, European and US economies stay unchanged. But decreasing power consumption in China mirrored domestic soft demand. Markit December’s flash manufacturing PMI from Europe and US will be released advance to this week due to their Christmas Day holiday.

Producers and speculators will sell at highs when falling demand in China rises to the surface after speculation, which will be reflected in positions. Positions on the SHFE copper market have been around 800,000 for several weeks, showing that investors rush to buy at lows. And high copper positions are contributed mainly by three consecutive weeks’ decline in China’s inventories and a year’s fall in LME inventories. As such, attention should be paid to changes in copper positions, as this will decide its price movement in the latter part of the week.