Markets Speak: Federal Reserve Stimulus Fever Can Take Over Copper Bulls The Federal Reserve meeting due in September can again raise alarm bells in the minds of trading fraternity. Every time the calls of tapering the stimulus measure have emerged, there have been wild swings in the metals platform. Something similar is about to happen as the news of Chinese trade data has been discounted to death. Federal Reserve buys $ 85 billion per month worth of bonds from the markets. This supports the economy as liquidity remains in the system. However, the major liquidity has been transferred into risky asset classes like Gold and Copper. If, Mr Bernanke and his committee members decide to trim this it will act like a suction pump for investors. Everyone knows the supply situation of Copper. The high level of stocks of Copper in LME, that at one time reached 100% in 2013 is alarming. Whatever it takes to sustain Copper at $ 7200 per tonne on LME, it cannot justify the pace of rally solely driven by investment demand.
Posted on: Wed, 14 Aug 2013 05:26:18 +0000
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