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Why metal futures fall and fall again
At the beginning of the new year, the prices of international base metals represented by the London Commodity Exchange (LME) experienced a full-scale collapse scenario. This was the second time since October 13, 2004, the price of international base metals had plummeted. The plunge in the international market also dragged down Shanghai's copper and aluminum futures markets sharply lower across the board yesterday, with Shanghai copper hanging on the daily limit board. The plunge of the base metal, although similar, has a slightly different cause. Copper fell sharply: There are three main reasons why the price of copper fell sharply. One is the change in the exchange rate. Affected by the relatively new manufacturing industry in the United States, the U.S. dollar exchange rate rebounded strongly from 80.40 to 82.86 in the three most recent trading days with a short-term increase of 2.8%. The dollar exchange rate factor has been an important factor influencing the price fluctuation of basic metals. Looking ahead to the USD outlook, the trend of weakening in the medium term will not change easily. However, according to information from the US Federal Open Market Committee meeting on Tuesday, FOMC members once again expressed their optimistic views on economic recovery and pointed out that the economic expansion is based on a firm and resilient economy. Based on good expectations of the US economy and US Federal Reserve policymakers' remark that interest rates are too low to curb inflation, the US federal funds rate has room to increase in the first quarter, and the dollar rally is expected to extend for several days. The second is that the historically high copper price has triggered market profit taking. Since last year, the price of copper has touched more than 3,000 US dollars four times, but the attempt to challenge the 1979 high point of 3,200 U.S. dollars has failed. Consumers are in short supply for hedging prices above $3,000 and other strategic buying is even more rare. For producers, high-priced copper drives global supply continuously. The world’s largest copper producer, the Chilean Copper Association, has forecast that copper prices will decline in June 2005 due to the increase in supply and the slowdown in global economic growth. The executive vice president of Cochilco expects copper prices to fall to around $1.20/lb in 2005. Although the lower copper prices in the medium term will affect the export revenue of Chile’s copper, in 2005 Chile’s copper production will still increase by 3.5% to 5.55 million tons. Third, prices of other varieties have fallen to copper prices. London Aluminum performed extremely well in the previous period. It pulled 10 positives before New Year's Day and the price rose to a 10-year high. However, the huge profit-taking in short-term accumulation caused London Aluminum to plung nearly 10% late on Tuesday; among other non-ferrous metals, London Tin also started a round of collapse and its head was established. Precious metal gold has always been one of the strongest financial investments in the past year, but after the Christmas season, the price of gold dropped again and again. It wiped out more than one month's worth of gains. In addition, the Baltic Sea Dry Index of bulk shipping has also fallen dramatically in recent months. From the 6110 down to 4442, the drop reached 27%. The prices of various species in the relevant markets have already affected the bear market. This situation also occurred in mid-October of last year. At that time, the global stock market led by the United States also experienced a sharp drop. In summary, there is a reason for this copper price drop, but it is more influenced by the surrounding market. This situation is similar to October 2004. Therefore, it is too early to confirm that the copper market will begin to decline further. All along, I believe that copper is indeed building a historic head, but the time span will exceed market expectations and it is still a long process now. Before the head was completed, we still treated the copper price within the range of nearly $300 in the range of 2850-3150, and we were treated with a wide range of volatility. Therefore, it is a good method to buy in the range pattern and to buy along the way. Aluminum fall: All the funds are in trouble. The fall in aluminum prices in Shanghai was mainly due to the slump in LME aluminum prices. In 2004, the L&A Aluminum Fund’s signs of manipulation were very obvious. One of the distinctive features was the enthusiasm. Each time Danglun Aluminum technically breaks through, all technical factors are favorable to the long position. When retail investors generally chase for too much, it is when the fund's backhand is short-selling and the aluminum price plummets. In early 2005, the trend of aluminum continued to continue this characteristic: Alluminium first hit a new high in recent days, and then broke through the long-term resistance line above, and then continued to rise, aluminum prices have exceeded the potential of 2,000 US dollars, market sentiment once again ignited, and even Some agencies once again raised the average price of primary aluminum in 2005. It is precisely because of the recent technical point of view, Almighty Aluminum once again has formed an upward breakthrough, all the technical factors are more favorable features. Taking into account that the current situation of the fundamentals of the international aluminum market does not support the continuous rise of Lumium, the composition of Lumium's rise is still very large. Therefore, it has been suggested for some time that traders should keep a clear-headed mindset in the context of the continuous rise of Lum Aluminium, gradually lighten up on multiple orders, and refrain from admitting more trading strategies. From a technical point of view, Tuesday's sharp decline in aluminum, potential energy has been fully released. Moreover, the 1800 area was still the core position of aluminum prices for two consecutive months of October-December 2004. Technically, it should have strong support in the 1800 region. Therefore, after the aluminum price fell rapidly on Tuesday, it is unlikely that it will continue to plunge. After a slight fall, it is more likely that the price of oversold will rebound. Taking into account the trend after the first two crashes of Lum Al in 2004, taking into account the current fundamentals, aluminum prices do not have the conditions to take the bears. Therefore, despite Tuesday's plummeting market sentiment, the market sentiment once again panicked, but it can not be considered that the fall of Tuesday's aluminum is the starting point for the bull-turning bear. It is expected that the fund will have a greater likelihood of being washed up and down through the ups and downs of LME. The wide swing in aluminum price should be the main trend in the past one or two months. The major fluctuation range is between 1730-1880.