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9 10, 2024

Morgan Stanley raised its Brent price forecast to $80 a barrel (from $75) for Q4 2024 — TradingView News

By |2024-10-09T08:54:22+03:00October 9, 2024|Forex News, News|0 Comments


Morgan Stanley has bumped its forecast for Brent crude oil in the final quarter of 2024 to $80 / Barrel

  • up from its previous forecast of $75

MS cite heightened geopolitical risk.

MS are wary though, saying demand is weaker than expected and supply has been robust. And thus warn of a widening surplus in the market into next year.

Oil update, dipped back from its recent high on Wednesday:

  • Forexlive Americas FX news wrap 8 Oct:Some of the major currency pair following technicals



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9 10, 2024

Gold (XAU/USD) Heads Toward $2600/oz Ahead of FOMC Minutes and US CPI

By |2024-10-09T02:50:32+03:00October 9, 2024|Forex News, News|0 Comments


  • Gold prices fell in the US session after a positive European session, influenced by renewed US Dollar strength and concerns about China’s economic slowdown.
  • Despite the pullback, ETF demand for gold remains strong, and geopolitical risks in the Middle East persist, suggesting buying pressure remains.
  • From a technical analysis perspective, gold has broken out of a recent range, and further support and resistance levels are identified.

Most Read: USD/CHF Technical Outlook: Confluence Area Hints at Bullish Breakout

Gold prices tumbled in today’s US session having enjoyed a positive European session to say the least. The precious metal rallied from a low of 2628 in the European session to trade at a high of 2652 before the US open. 

The US session however brought some renewed US Dollar strength, as Gold’s appeal appears to be waning. This was also the first US trading session since the National Development and Reform commission in China provided a briefing on the recent stimulus measures. The address today however failed to deliver any new measures and concern still lingers among many market participants. 

China, the largest global consumer of metals, has dampened metals demand for over two years. Despite the Peoples Bank of China buying significant amounts of Gold there have been growing concerns of a widespread economic slowdown, especially the property sector crisis, has pressured copper and other industrial metals. Despite numerous property support measures this year, they have yet to significantly boost metals demand.

This renewed concern around China could not have come at a worse time for Gold Bulls. The aggressive repricing of rate cuts over the last few days coupled with the lack of response to the Iranian missile attack has formed the perfect cocktail for a pullback in Gold prices. 

The question is whether this is the end of the bullish rally?

ETF Demand Remains Strong and Geopolitical Risks Remain 

That is a very nuanced question given the various factors at play. For one though, the Middle East crisis is far from being resolved and the chance of escalation is certainly higher following the Iranian missile attack last week. There is bound to be an Israeli response which Iran has vowed will be met by a new attack as well. 

These dynamics mean the Middle East situation could still blowover reigniting the safe haven appeal of Gold. Looking even further down the line, the World Gold Council September report was released today. 

According to the latest World Gold Council (WGC) report, net ETF inflows increased again in September. ETF flow levels are often seen as a strong indicator of future demand trends. Gold-backed ETFs added 18 tonnes of gold in September, bringing total holdings to 3,200 tonnes. This led to cumulative inflows of $1.4 billion for the month, marking the fifth consecutive month of inflows.

This data follows similar trends in August, when Gold ETFs saw $2.1 billion in inflows, and July, which recorded $3.7 billion—the highest since April 2022.

Source: WGC Report (click to enlarge)

This coupled with the World Gold Council survey of Central Banks earlier this year hint that Gold demand is to remain strong in the medium to longer term. This would suggest that support for Gold remains and thus the current pullback could just be another false dawn. Either way i am intrigued to see how far today’s pullback may run. 

Economic Data Ahead

FOMC minutes will be released tomorrow in what I expect to be a non-event following the jobs data release last week. The Fed meeting on September 18 would likely have been dominated by concern around an ailing labor market which last week’s jobs report put to bed for the time being. 

US CPI on Thursday is likely to be the next major market moving event, however tomorrow’s list of Fed Speakers may also contribute to some volatility.

Gold (XAU/USD) Heads Toward 00/oz Ahead of FOMC Minutes and US CPI

For all market-moving economic releases and events, see the MarketPulse Economic Calendar. (click to enlarge)

Technical Analysis Gold (XAU/USD)

From a technical analysis standpoint, Gold had been caught in a tight range of around $30 since the start of October. There were brief tests below the 2640 handle in recent days but the four-hour candle always closed back inside the range low at 2640. 

The breakout today has been quite aggressive with Gold reaching a low around the 2604 handle before bouncing to trade around 2614 at the time of writing. As mentioned technically Gold is due for a deeper pullback but the fundamental risks continue to underpin prices and keep selling pressure at bay.

If the selloff continues tomorrow, immediate support rests around 2600 before the 2574 handle comes into focus. 2574 could prove a tough hurdle to clear as just below it rests the 200-day MA making this a key area of confluence that could find some buying pressure.

Alternatively, a recovery from here may face a challenge at 2624 before the 100-day MA at 2630 becomes key. Beyond that and the previous H4 range low at 2640 could be key for bulls to regain control of the narrative moving forward.

GOLD (XAU/USD) Four-Hour (H4) Chart, October 8, 2024

Source: TradingView (click to enlarge)

Support

Resistance

Follow Zain on Twitter/X for Additional Market News and Insights @zvawda

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.

Zain Vawda

Zain is an experienced financial markets analyst and educator with a rich tapestry of experience in the world of retail forex, economics, and market analysis. Initially starting out in a sales and business development role, his passion for economics and technical analysis propelled him towards a career as an analyst.

He has spent the last 3 years in an analyst role honing his skills across various financial domains, including technical analysis, economic data interpretation, price action strategies, and analyzing the geopolitical impacts on global markets. Currently, Zain is advancing in obtaining his Capital Markets & Security Analyst (CMSA) designation through the Corporate Finance Institute (CFI), where he has completed modules in fixed income fundamentals, portfolio management fundamentals, equity market fundamentals, introduction to capital markets, and derivative fundamentals.

He is also a regular guest on radio and television programs in South Africa, providing insight into global markets and the economy. Additionally, he has contributed to the development of a financial markets course approved by BankSeta (Banking Sector Education and Training Authority) at NQF level 6 in South Africa.

Zain Vawda





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9 10, 2024

EIA reduces crude oil price forecast through end-2025 on lower demand

By |2024-10-09T00:49:50+03:00October 9, 2024|Forex News, News|0 Comments


In the October Short-Term Energy Outlook (STEO), the US Energy Information Administration (EIA) lowered its Brent crude oil spot price forecast through end-2025.

The latest outlook predicts an average Brent price of $78/bbl in 2025, $7/bbl less than last month’s forecast. Lower crude oil prices largely reflect a reduction for global oil demand growth in 2025, according to EIA.

“We forecast that global consumption of liquid fuels will increase by 900,000 b/d in 2024 and 1.3 million b/d in 2025. Our 2024 forecast is down from last month due to downward revisions to demand in China and our 2025 forecast is down primarily because of downward revisions to demand in OECD countries,” EIA said.

“We reduced our forecast for China’s liquid fuels consumption in 2024 because of continued declines in the country’s crude oil imports and refinery runs in third quarter 2024. Although the Chinese government recently announced monetary stimulus measures that could result in higher economic growth and petroleum consumption in 2025, we have kept our forecast 2025 growth rate largely unchanged. We forecast China’s petroleum and liquid fuels consumption will grow by about 100,000 b/d in 2024 and 300,000 b/d in 2025,” the report continued. 

“We reduced our forecast of total OECD oil consumption by 200,000 b/d in 2025 compared with last month’s STEO as a result of weaker expectations for industrial production and manufacturing growth in the US and Canada.”

Most of EIA’s expected global liquid fuels demand growth is from non-OECD countries where liquid fuels consumption increases by 1 million b/d in 2024 and 1.2 million b/d in 2025, in contrast to consumption in OECD countries, which falls by 100,000 b/d in 2024 before increasing by a similar amount in 2025.

“Although we reduced our crude oil price forecast, crude oil prices have risen in recent days because of escalating conflict in the Middle East, raising the possibility of oil supply disruptions and further crude oil price increases,” EIA noted.

The Brent crude oil spot price averaged $74/bbl in September, a decrease of $6/bbl from August. Prices dropped as concerns over global oil demand growth outweighed reductions in oil inventories and OPEC+ members’ decision to delay production increases until December 2024. However, after recent military actions involving Israel, Lebanon, and Iran, the Brent spot price increased to $79/bbl on Oct. 4, up 11% from the previous week.

“The potential for further escalation– such as an Israeli response to Iran’s missile attack on October 1– have injected significant uncertainty and volatility into oil markets in recent days. Following the September drop in prices and our expectation that oil demand growth will be lower next year than we had previously forecast, we have lowered our forecast for crude oil prices despite increasing oil prices in early October. We now expect Brent will average $78/b in 2025, $7/bbl less than our forecast from last month,” EIA said.

Global oil production

EIA anticipates that production growth outside of OPEC+ will remain strong over the forecast period, and as a result OPEC+ producers will likely keep production less than their recently announced targets for much of next year.

EIA expects that global production of petroleum and other liquid fuels will increase by 2 million b/d in 2025, up from growth of just 500,000 b/d this year. Countries outside of OPEC+ are expected to increase production by 1.4 million b/d next year, while OPEC+ production will increase by 700,000 b/d, after the voluntary cuts reduced OPEC+ production by 1.3 million b/d this year.

“In addition to voluntary cuts to OPEC+ production, a force majeure in Libya in August and September reduced oil production. We estimate Libya’s crude oil production fell to 400,000 b/d in September 2024 from nearly 1.2 million b/d in July 2024 before the disruptions began,” EIA said.

“As of early October, it appears the cause of the disruption has come to a resolution, with affected production potentially restarting in October. We assume Libya’s oil production will average 600,000 b/d for the rest of this year.”

EIA also revised its estimate of Iraq’s crude oil production, including historical production, up by an average of 200,000 b/d in 2024 to account for assessment that more crude oil is being used in new refining capacity in Iraq than the agency had previously determined.

“Although we raised our assessment of Iraq’s oil production, we still estimate that Iraq cut its crude oil production by 300,000 b/d from July through September 2024 to comply with OPEC+ production quotas.”

In this month’s outlook, EIA educed its 2025 forecast for US Lower 48 states (L48) crude oil production from last month by 1% to 11.3 million b/d. This reduction reflects a downward revision to EIA’s West Texas Intermediate (WTI) crude oil price forecast.

EIA now expects WTI will average $72/bbl in fourth-quarter 2024, about $6/bbl lower than last month’s forecast. Because there is about a 6-month lag between price changes and producer activity, the recent price declines will begin reducing US crude oil production in mid-2025. By December 2025, US L48 crude oil production will be 11.4 million b/d, 2% lower than EIA’s September STEO forecast.



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8 10, 2024

Arabica Coffee Bean Prices: In-depth analysis and forecast

By |2024-10-08T22:49:19+03:00October 8, 2024|Forex News, News|0 Comments


The Arabica coffee bean prices is not merely a simple figure; it results from the complex interplay of numerous natural, economic, market, and geopolitical factors. This article delves into the analysis of the factors influencing the price of Arabica coffee beans, offering an overview of historical price fluctuations and providing forecasts for future price trends. By thoroughly understanding the drivers behind Arabica price volatility, we can better assess its impact on the coffee industry as a whole and the livelihoods of millions of people involved in the coffee value chain.

The importance of Arabica Coffee Bean Prices

Arabica coffee accounts for about 60-70% of global coffee production and is considered the highest-quality coffee. Its price has far-reaching effects for several reasons:

  1. Global Supply Chain: Arabica prices directly affect the income of millions of coffee farmers in developing countries such as Brazil, Colombia, Ethiopia, and Vietnam. Price fluctuations can significantly impact their livelihoods.

  2. Market Benchmarking: Arabica prices are often used as a benchmark for pricing other coffee varieties, including Robusta. Hence, it indirectly influences the entire coffee market.

  3. Impact on Consumers: When Arabica prices rise, roasters and retailers often have to increase the prices of their final products, directly affecting the cost for consumers enjoying their coffee.

  4. Economic Impact: For major coffee-exporting countries, Arabica price volatility can significantly influence GDP and the trade balance.

  5. Product Quality and Diversity: Pricing affects the ability of farmers and producers to invest in quality and innovation, which, in turn, influences the diversity and quality of coffee products in the market.

Factors influencing Arabica Coffee Bean Prices

Natural factors

a) Climate:

  • Drought: Causes water shortages, reducing both yield and quality. For example, severe droughts in Brazil in 2021 caused Arabica prices to spike.
  • Storms: Excessive rainfall can lead to flooding, damaging coffee trees and fruits. Major storms can devastate entire coffee-growing regions.
  • Pests and Diseases: Coffee leaf rust is one of the most significant threats, capable of substantially reducing yields.

b) Soil Conditions:

  • Fertile, mineral-rich soil, such as that in Colombia’s volcanic regions, produces high-quality coffee, positively impacting prices.
  • Altitude (typically 1000-2000m) affects coffee flavor and quality, which in turn influences pricing.

Economic factors

a) Supply and demand:

  • Production: Good crop forecasts generally drive prices down, while poor forecasts push prices up.
  • Consumption Demand: Rising coffee consumption in emerging markets, such as China, can drive prices higher.

b) Production costs:

  • Increasing costs for fertilizers and pesticides raise production expenses, indirectly affecting prices.
  • Rising labor costs in key coffee-producing nations also contribute to higher prices.

c) Government policies:

  • Government programs supporting farmers (e.g., subsidies, crop insurance) can influence production and pricing.
  • Export policies in major producing countries, like Brazil, can significantly impact global prices.

Market factors

a) Futures trading:

  • Arabica prices are often referenced from futures contracts on the ICE (Intercontinental Exchange).
  • Activity by investment funds and speculators can cause significant short-term price volatility.

b) Speculation:

  • Speculative activities, particularly during periods of high market volatility, can exacerbate price swings.

c) Consumer trends:

  • The rising demand for specialty and organic coffee has created a premium market segment with higher prices.
  • Trends toward sustainable and responsible consumption also affect price structures.

Arabica Coffee Bean Prices: In-depth analysis and forecast

Chart of Price Fluctuations for Robusta and Arabica Coffee Each Year

Geopolitical factors

a) Wars and conflicts:

Conflicts in major coffee-producing countries can disrupt supply chains and drive prices higher.

b) Economic crises:

Global economic downturns can reduce coffee consumption, impacting prices.

c) Trade policies:

Trade agreements or barriers (such as tariffs) can affect the flow of coffee on the international market, influencing prices.

Historical price fluctuations

Key phases and causes

2000-2005: Period of low prices

  • Main Cause: Oversupply due to the expansion of coffee-growing areas in major producing countries such as Brazil and Vietnam in the 1990s.
  • Impact: Arabica prices fell to record lows, around 45-50 cents per pound in 2001-2002.
  • Consequence: Many small farmers abandoned coffee cultivation, leading to a global coffee crisis.

2006-2011: Period of strong price growth

Supply shortages due to severe droughts in Brazil (2007-2008) and heavy rains in Colombia (2009-2010).

Strong market speculation due to the 2008 financial crisis.

Growth of the specialty coffee industry, increasing demand for high-quality Arabica.

  • Peak: Prices reached a record high of $3.09 per pound in May 2011.

Giá hạt cà phê Arabica: Phân tích chuyên sâu và dự báo xu hướng

High profits for farmers, but also creates challenges for roasters and retailers in maintaining profit margins

2012-2019: Period of price decline and relative stability

Strong production recovery, particularly in Brazil, thanks to investment in farming technologies and new coffee varieties.

Growth of Vietnam’s coffee industry, primarily Robusta, but also influencing overall supply-demand dynamics.

Depreciation of the Brazilian real against the USD, encouraging exports and lowering global coffee prices.

  • Impact: Prices fell from their peak to around $1 per pound in 2019, creating significant pressure on farmers in smaller producing countries like Colombia and Ethiopia.

2020-2023: Period of extreme volatility due to pandemic and climate extremes

2020: The COVID-19 pandemic caused initial price declines due to demand concerns, followed by price increases due to supply chain disruptions.

2021: Severe frost in Brazil (July 2021) destroyed around 20% of the crop, pushing prices to a seven-year high.

2022-2023: Global inflation and ongoing supply chain disruptions continued to cause price volatility.

Impact: Rising costs across the coffee value chain, from farmers to end consumers.

In-depth analysis of impact factors

Brazil’s role

  • Brazil accounts for about 35-40% of global Arabica production.
  • Any changes in weather or policies in Brazil have a strong influence on global prices.
  • Example: The 2021 frost in Brazil drove Arabica prices up nearly 30% in just a few weeks.

Climate change impact

  • Increasing frequency and intensity of extreme weather events.
  • Shifting rainfall and temperature patterns affect both yield and quality.
  • Forecast: By 2050, the land suitable for Arabica cultivation could shrink by 50% due to climate change.

Growth of the specialty coffee market

  • Increasing demand for high-quality Arabica, particularly in developed markets.
  • Creates a premium price segment that is less susceptible to standard commodity price fluctuations.
  • Encourages investment in quality and traceability.

Financial speculation impact

  • Coffee is one of the most heavily traded commodities.
  • Activities by investment funds and speculators can cause short-term price volatility unrelated to fundamental supply-demand factors.
  • Example: Speculation during the 2008-2011 period contributed to record-high coffee prices.

Forecasting Arabica Coffee Price Trends

Factors influencing future trends

Climate change

  • Impact: A projected decline in suitable land for growing Arabica, particularly in traditional regions.
  • Consequence: This could lead to scarcity and long-term price increases.
  • Potential Solutions: Developing heat- and drought-resistant varieties, moving plantations to higher altitudes or closer to the poles.

Consumption demand

  • Trend: Strong growth in emerging markets like China and India.
  • Challenge: Balancing rising demand with supply constraints due to climate change.
  • Opportunity: Growth in the specialty coffee market, adding value for farmers.

Farming technology

  • Advances: Use of AI and IoT for farm management and pest forecasting.
  • Impact: Stabilizing production and reducing price volatility from weather factors.
  • Challenge: Ensuring widespread adoption, not just in large-scale farms.

Environmental and sustainability policies

  • Trend: Increasing sustainable standards in coffee production.
  • Impact: Short-term production costs may rise, but long-term industry sustainability is ensured.
  • Opportunity: Added value through sustainability certification and traceability.

Potential scenarios

Price increase scenario

  • Conditions: Severe climate change impacts on major growing regions, especially Brazil.
  • Consequence: Prices may soar, surpassing the historical peak of $3.09/lb.
  • Impact: Significant pressure on the supply chain, possibly leading to industry restructuring.

Price decrease scenario

  • Conditions: Significant yield improvements through farming technology and successful expansion of new growing areas.
  • Outcome: Prices may fall below $1/lb.
  • Impact: Beneficial for consumers but putting pressure on smallholder farmers.

Stable price scenario

  • Conditions: Balance between supply and demand, with effective policy intervention and technological progress.
  • Outcome: Prices remain within a range of $1.5-2.5/lb.
  • Impact: Stability across the industry, encouraging long-term investment.

Risk warnings

Extreme climate risk

Increasing likelihood of abnormal weather events (e.g., El Niño, La Niña), which could cause unexpected supply shocks, leading to significant price volatility.

Giá hạt cà phê Arabica: Phân tích chuyên sâu và dự báo xu hướng

Climate change is one of the top issues in the coffee industry as a whole.

Geopolitical risks

  • Political instability in major producing countries (e.g., conflicts in Ethiopia, a key Arabica producer) could disrupt supply.
  • Changes in trade policies (e.g., tariffs, quotas) could affect global coffee flows.

Macroeconomic risks

  • Currency fluctuations, particularly between the Brazilian real and USD, could have a strong impact on coffee prices.
  • Global inflation could influence production costs and retail prices.

Pandemic risks

  • Events like COVID-19 could cause sudden disruptions in supply chains and consumption patterns.
  • Future crisis management plans are needed to mitigate similar impacts.

Conclusion:

Arabica coffee prices are complex, reflecting interactions among various natural, economic, political, and social factors. As climate change and global challenges intensify, accurately forecasting Arabica coffee price trends has become more difficult than ever. However, by thoroughly understanding the influencing factors and analyzing historical trends, we can make reasonable predictions about the future of Arabica coffee prices.

Related questions (FAQs)

1. Why is Arabica Coffee More Expensive than Robusta?

Arabica coffee is typically more expensive than Robusta for several reasons:

  • Quality: Arabica has a more refined flavor, less bitterness, and is generally considered a higher-quality coffee.
  • Growing Conditions: Arabica is harder to grow, requiring specific climate and altitude conditions, which increases production costs.
  • Yield: Arabica plants produce lower yields compared to Robusta, leading to a more limited supply.
  • Demand: There is higher demand for Arabica in the specialty coffee industry and premium coffee chains.

2. How Do Fluctuations in Arabica Coffee Prices Affect Coffee Shop Prices?

Fluctuations in Arabica coffee prices affect coffee shop prices in various ways:

  • Direct Impact: When raw material prices increase, the input costs for coffee shops rise.
  • Lag Effect: There is often a 3-6 month lag between fluctuations in coffee bean prices and retail prices due to pre-purchased contracts and inventory.
  • Business Strategy: Larger chains can better absorb short-term price fluctuations compared to smaller shops.
  • Market Segment: Premium coffee shops are less affected due to their ability to pass on costs to consumers.

3. Is All Arabica Coffee of the Same Quality?

No, Arabica coffee quality can vary significantly:

  • Geographical Factors: Climate, altitude, and soil conditions of the growing region greatly influence quality.
  • Processing Methods: Wet processing generally yields higher quality compared to dry processing.
  • Harvesting Methods: Hand-picking, which selects ripe beans, typically results in better quality than mechanical harvesting.
  • Grading: Coffee is classified based on bean size, number of defects.
  • Cupping Score: Specialty coffee is often rated by cupping scores, with scores above 80 considered high quality.

4. How Can Consumers Manage Rising Arabica Coffee Prices?

Consumers can manage rising Arabica coffee prices by:

  • Switching to Blends: Using coffee blends of Arabica and Robusta can reduce costs.
  • Buying in Bulk: Taking advantage of discounts by buying and storing coffee in larger quantities.
  • Investing in Home Brewing Equipment: Saving costs in the long run compared to buying coffee at cafés.
  • Exploring Specialty Coffee: Using less coffee but of higher quality can provide a good experience at a reasonable cost.
  • Watching for Promotions: Many coffee chains frequently offer discounts.

5. How Will Climate Change Affect the Future of Arabica Coffee?

Climate change may severely impact the future of Arabica coffee:

  • Reduced Growing Areas: Rising temperatures could reduce suitable land for Arabica cultivation by up to 50% by 2050.
  • Increased Pest Risks: Warmer temperatures facilitate pest proliferation, especially coffee rust.
  • Quality Changes: Higher temperatures and erratic rainfall can affect coffee cherry development, altering flavor profiles.
  • Shifting Growing Areas: Farmers may need to move cultivation to higher altitudes or towards the poles.
  • Research Needs: Investment in developing more heat- and drought-resistant coffee varieties is necessary.

These challenges may lead to scarcity and higher prices for Arabica coffee in the future, driving the need for innovation in the global coffee industry.



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8 10, 2024

XAU/USD pierces $2,630 and aims for lower lows

By |2024-10-08T18:47:10+03:00October 8, 2024|Forex News, News|0 Comments


XAU/USD Current price: $2,627.85

  • US dollar upsurge, finding additional support in a risk-averse environment.
  • FOMC Meeting Minutes and the US Consumer Price Index stand out this week.
  • XAU/USD is bearish in the near term, could accelerate its slide once below $2,624.50.

Spot Gold trades with a modest downward bias for the fifth consecutive day, hovering at around $2,645 a troy ounce after the United States (US) opening. The XAU/USD pair has been shedding some ground in the last few days, albeit still far from suggesting an interim top at the record high of $2,685.45 posted in September.

Despite the recent US Dollar upsurge, the bright metal continues to attract investors, as they face multiple different fronts. On the one hand, the USD benefits from solid US macroeconomic data and reduced bets for a Federal Reserve (Fed) massive interest rate cut. On the other hand, speculative interest weighs in mounting tensions in the Middle East.  Finally, stocks turned north at the beginning of the week, with losses in the tech sector dragging all major indexes and maintaining afloat the safe-haven metal.

Data-wise, the calendar had offered little of relevance this week, with the focus on upcoming US data. The Federal Open Market Committee (FOMC) will unveil the Minutes of its September meeting on Wednesday. The document may miss the surprise factor after comments from Fed officials flooded the news post-meeting and following an outstanding Nonfarm Payrolls (NFP) report.  

On Thursday, the country will release the September Consumer Price Index (CPI), which may gain relevance after solid employment-related data. Inflation in the US has retreated sharply after peaking at record highs in 2022 but remains above the Fed’s goal of around 2%. Nevertheless, officials have said they remain confident they will soon achieve such a goal. Should CPI figures come in higher than anticipated, investors may reduce bets for a November rate cut and, hence, provide the USD with an unexpected boost.

XAU/USD short-term technical outlook  

From a technical perspective, XAU/USD is in a consolidative phase, still developing above all its moving averages in the daily chart. Even further, the 20 Simple Moving Average (SMA) maintains a sharp upward slope far above the longer ones while providing dynamic support at around $2,620. At the same time, the Momentum indicator is flat well above its 100 line, while the Relative Strength Index (RSI) indicator aims marginally lower at around 61, none of them enough to support a steeper decline.

Technical readings in the 4-hour chart offer a neutral-to-bearish stance. XAU/USD pressures its intraday lows, while a mildly bearish 20 SMA contains intraday advances. At the same time, a still bullish 100 SMA provides support. Finally, technical indicators turned south within negative levels, maintaining the downward slope. A steeper near-term decline could be expected on a break below $2,624.50, the immediate support area.

Support levels: 2,624.50 2,616.00 2,603.90

Resistance levels: 2,649.45 2,663.00 2,673.20



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8 10, 2024

XAU/USD threatens key $2,630 support ahead of more Fedspeak

By |2024-10-08T10:41:09+03:00October 8, 2024|Forex News, News|0 Comments


  • Gold price extends a five-day losing streak early Tuesday, despite risk aversion.    
  • The US Dollar pulls back with Treasury yields following dovish Fedspeak.                      
  • Gold price threatens key $2,630 support; will it defend it amid bullish daily RSI?

Gold price maintains its corrective decline early Tuesday, looking to threaten the lower boundary of the recent range at $2,630. The focus now remains on the Middle East tensions, additional Chinese stimulus rollout and speeches from US Federal Reserve (Fed) policymakers for fresh directives.

Gold price reels from China’s economic pain  

Gold price is struggling to find a foothold, as sellers remain in control amid the re-emergence of worries surrounding China’s economic prospects, as Chinese traders return after a week-long holiday break.

Even though Chinese stocks re-opened with a bang, no announcements on further stimulus so far and the National Development and Reform Commission’s (NDRC) gloomy outlook on China’s economy intensified risk aversion across Asia.

China’s state planner, the NDRC, said in its press conference that “the downward pressure on China’s economy is increasing.” Gold price, therefore, remains undermined, as China is the world’s top Gold consumer.

The Gold price correction, however, appears cushioned by a broad pullback in the US Dollar (USD) alongside the US Treasury bond yields, following the dovish remarks from  St. Louis Fed President Alberto Musalem. Musalem said late Monday that “further gradual reductions in the policy rate will likely be appropriate over time,” adding that “I will not prejudge the size or timing of future adjustments to policy.”

His comments fuelled a fresh leg down in the USD, despite markets ruling out a 50 basis points (bps) Fed rate cut next month. Markets are currently pricing in about an 86% chance that the Fed will opt for a 25 bps rate cut at its next meeting, the CME Group’s FedWatch Tool shows.

Looking ahead, speeches from Atlanta Fed President Raphael Bostic and Fed Vice Chairman Philip Jefferson will be closely scrutinized in the absence of any top-tier economic data releases from the US later on Tuesday.

Traders will also pay attention to the escalating conflict between Israel and Iran, especially after the Iran-backed militant group, Hezbollah, fired dozens of rockets at Israel’s third-largest city, Haifa. Meanwhile, the Israeli military has described its recent ground operation in Lebanon as “localized, limited and targeted,” but it has steadily increased in scale beginning last week.

Gold price technical analysis: Daily chart

Following a gradual decline over the last four days, Gold buyers are seen challenging the key static support of $2,630.

The 14-day Relative Strength Index (RSI), however, stays well above the midline, currently near 62, suggesting that any decline in Gold price could be likely bought into.

Gold price needs a daily candlestick closing above the strong resistance near $2,670 to negate the near-term downside pressure.

The next resistance is aligned at the record high of $2,686. Further up, buyers will target the $2,700 round level.

On the flip side, Gold sellers must crack the intermittent low of $2,630 on a daily closing basis to unleash further correction toward the $2,600 threshold.

Ahead of that level, the 21-day Simple Moving Average (SMA) at $2,614 could offer a temporary relief to buyers.  

Gold FAQs

Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.

Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.

Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.

The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.

 



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8 10, 2024

how copper will shape our future

By |2024-10-08T08:40:03+03:00October 8, 2024|Forex News, News|0 Comments


Please refer to the Important Notice at the end of this article1

Copper has shaped human history and civilisation for millennia. In the 20th century, the story of copper was inextricably linked to the rise of electricity demand. As we harnessed electrical power, copper became an indispensable material, crucial to our energy systems and modern technology. 

Through the 21st century, we expect copper to remain an essential building block to modern life as the world seeks to improve living standards for billions of people, transitions towards a net zero greenhouse gas (GHG) emissions economy, and further digitalises its industries and societies. 

In this article, we discuss:

  • Why we believe global copper demand will grow by around 70% to over 50 million tonnes (Mt) a year by 2050 and our view on how copper’s role in multiple applications will provide demand resilience.
  • The looming global copper supply challenge as existing copper mines age, with the pipeline of potential projects less healthy than in previous cycles. Both brownfield and greenfield projects are expected to face cost and stakeholder challenges.
  • Why ‘long-run marginal cost’-based inducement is still our preferred approach to forecasting price in the long run.

Demand

Total global copper demand has grown at a 3.1% compound annual growth rate (CAGR) over the last 75 years – but this growth rate has been slowing. It was only 1.9% over the 15 years to 2021. Looking to 2035, however, we expect this growth rate to jump back to 2.6% annually. 

We believe this reversal will come from a combination of three key themes: ‘Traditional’ economic growth, and the newer themes of the ‘Energy Transition’ and ‘Digital’ (primarily data centres).

‘Traditional’ demand refers to the basic relationship between economic growth, electricity consumption and copper. Through the 20th century and into the 21st, as countries developed, electricity became accessible to industry and homes and led to the creation of products that lifted living standards: lighting, washing machines, refrigerators, air conditioners, radio and television, computers and smartphones. It is not only these products that need copper; so do the factories and supply chains that produce and deliver them, and the power infrastructure keeping them all running. Copper’s broad application across multiple end-uses has made it resilient and less-exposed to single point failures of demand.

Traditional demand in the developed world is expected to remain strong and as living standards rise globally, the demand for copper is expected to follow suit. Developing economies, which have nearly five times the population of high-income economies, will increasingly strive to achieve the same high standard of living. This transition will lead to a greater need for copper. 

Take China for example, despite its enormous appetite for copper over the past two decades, it still only has half of the copper accumulated stock-in-use per capita (e.g. buildings, machinery, vehicles) compared to a developed economy, at around 100 kilograms per capita. India, the other major economy with over one billion people, also has a compelling copper story. India’s electricity consumption per capita currently stands at around one-seventh of Japan’s and one-fifth of China’s, and we expect its copper demand to grow five-fold over its pre-Covid volumes in the coming decades as electricity is made more accessible.

This traditional demand provides a solid foundation, but it does not account for the rapid acceleration of growth expected in the decades to come. That will be driven by the ‘Energy Transition’ and ‘Digital’ trends.

Since the Industrial Revolution, the use of fossil fuels has helped the world unlock greater levels of productivity. As the world seeks to rein in the use of these fuels (and their related carbon emissions), it will need more electricity (mainly from renewable sources) to keep everything running. Most energy modellers agree that electrification will be a major enabler of the decarbonisation of transport, buildings and large parts of industry. Under our base case, we see electricity demand roughly doubling from today to 2050, as electricity’s share of total energy consumption also doubles to around 40% by 2050.2

‘Energy Transition’ copper demand refers to the additional copper required to achieve that level of electrification. As the most conductive industrial metal, copper is a key enabler of low GHG emissions energy sources, such as wind, solar, and hydro, as well as electric vehicles (EV) and batteries. An EV, for example, uses around three times more copper than typical internal combustion engines (ICE). As the energy transition unfolds, we anticipate the roll-out of EVs to lift the transport sector’s share of total copper demand from around 11% in 2021, to over 20% by 2040.3 Copper is also needed for energy efficiency and conservation measures, such as smart grids, LED lighting, and heat pumps. On top of this, the generation and transmission of low GHG emissions electricity is expected to require more copper than conventional fossil fuel power generation.4   

‘Digital’ demand refers to the growth from the expected ramp-up in demand for digital infrastructure, as the world creates and consumes massive amounts of data, enabled by copper-hungry data centres. Artificial Intelligence (AI)-enabled technology requires vast amounts of data and processing capability, which in turn needs larger and faster computers consuming more electricity. We expect global electricity consumption for data centres to rise from around 2% of global demand today, to 9% by 2050, with copper demand in data centres increasing six-fold by 2050.5  

Today, we estimate that the Traditional vs Energy Transition vs Digital split of global copper demand is around 92%/7%/1%. By 2050, we predict the split to have evolved to 71%/23%/6%.6 

Towards 2050

What is unique about the next 25 years is the way copper demand from electrification, decarbonisation and digitisation will cut across high, middle and lower-income economies alike. Unlike the 20th century, where the adoption of cars, electricity, consumer electronics and white goods occurred at different times across various regions, we expect to see more-or-less concurrent adoption of the copper-intensive technologies of EVs, renewables and data centres around the world.

There will be some balancing factors for this significant growth in copper demand, such as from substitution and thrifting, which have been a feature of the copper industry throughout its history.

  • Substitution refers to the replacement of copper by other materials, such as aluminium, plastics, or fibre optics, which can be cheaper, lighter, or more efficient for certain applications. (Or in some cases, the adoption of a different technology with a lower copper content.)
  • Thrifting refers to the reduction of copper content or usage in products or processes, while maintaining functionality, through design improvements and technological innovations.

When it comes to copper-to-aluminium substitution, many have long held to the ‘three to one’ rule of thumb: when the copper price is more than three times the price of aluminium, you will start to get increased levels of substitution. More recently, some estimates have adjusted this ratio higher, to around 3.5 times.

However, the copper-to-aluminium ratio7 has been in excess of 3.5 for much of the past five years, supporting our belief that the price ratio needs to be higher still, at around 3.5 to 4 times, before you see greater levels of substitution. 

It is not just about cost either. Substitution and thrifting require design alteration, product line modification and investment in new equipment, and worker retraining. And uptake relies on customers believing the product works as well or better than what they can access today. None of these things happen quickly, especially in the well-established ‘traditional’ end-uses. The sectors that are most exposed to substitution and thrifting are those driving demand in the Energy Transition segment. These new technologies are still undergoing evolution and development, and each iteration presents a new opportunity to reduce copper use – up to a certain limit.

We also believe copper has some unique advantages that make it difficult to substitute or thrift in many end-uses, such as its conductivity, durability, recyclability and antimicrobial properties. This is why it remains widely used, despite potentially cheaper options being available. Copper also has a smaller GHG emissions intensity8 footprint than aluminium, which may be a relevant factor when choosing materials in the future.

While we expect substitution and thrifting will rise from current levels, this should be a gradual process, as has been observed over the past century. 

Putting all these levers together, we project global copper demand to grow by around 70% to over 50 Mt per annum by 2050 – an average growth rate of 2% per year.

Due to the concurrent adoption of new copper-intensive technologies, as well as support from the broad-based ‘traditional’ development across end-uses in emerging economies, we anticipate a re-acceleration of copper demand to 2035 of 2.6% CAGR, versus a 1.9% CAGR over the past 15 years. In absolute terms, this is roughly 1 Mt copper demand growth per year, every year, until 2035 ‒ double the 0.5 Mt annual growth volume of the past 15 years. 

Supply

As with demand, there are different drivers of copper supply. First and foremost, primary supply comes from mines and processing facilities such as those that BHP operates. 

But secondary, or scrap, copper is also an important source of supply. Copper can be recycled from end-of-life products (‘old scrap’) or from waste generated in the manufacturing process (‘new scrap’), reducing the need for primary copper from mining.9 

Scrap and recycling


Recycled copper is expected to be an important source of supply to meet the large copper demand growth over the next 30 years. The main barrier to recycled copper supply is the availability of scrap. 

The pool of ‘old scrap’10 is principally determined by the average lifetime of an end-use product. These lifetimes can range from weeks or months for some consumer products (e.g. from batteries, headphones, charging cables) up to several decades (e.g. from construction and infrastructure). We assess the average life of copper in-use to be around 20 years.

Much of this ‘old scrap’ is also not recovered. We estimate that in 2021 only 43% of available ‘old scrap’ was collected and recovered for re-use, falling to 40% in 2023 as lower prices, slowing economic activity and regulatory changes acted as headwinds. Rising ‘scrap nationalism’ to preserve the local use of secondary material and restrictions in cross-regional waste trade have also acted as a drag on growth for global scrap collection and recovery11 (and may affect the availability of scrap in developing countries who have not yet built up their own substantial pool of copper in-use).

Nevertheless, we expect the increased focus on copper as a critical or strategic raw material will lift copper scrap collection and recovery rates from their current levels to 56% by 2035 and even higher longer term.12

With the growing scrap pool, we estimate that scrap supply will increase from around one third of global copper today to around 40% by 2035, and reach around a half of total copper consumption by 2050.

But even with this increasing use of copper scrap, we still expect more primary, or mined, copper will still be required when you add grade decline and mine depletions on top of this.

We estimate that the world will need about 10 Mtpa new mined copper supply13 in the next 10 years. 

Where will it come from?

Mine supply

Copper reserves and production are concentrated in Latin America, Australia and Africa. The last 30 years has seen impressive supply growth globally, with production doubling to around 22 Mtpa today, primarily due to increases from Latin America (particularly Chile), the Asia Pacific region and Africa (over the last 10 years). This has been achieved through significant investment in greenfield projects and the wide-spread adoption of the leach-solvent extraction-electrowinning (SxEw) process from the mid-1980s, which unlocked previously uneconomic copper supply low grade oxide ores. This process now accounts for 20% of mine supply. 

The industry’s current challenge is to repeat this substantial volume growth in less than half the time.

We expect supply growth over the next 10 years to be dominated by the same regions – Latin America Africa and Asia Pacific – with Africa having the highest growth rate (albeit off a much lower base than Latin America), and Latin America continuing to make the most significant contribution in absolute terms.

View the full size map here.

Against optimistic supply forecasts, which include the development of all probable copper projects, a significant gap to expected demand in 2035 is evident, even with our positive view on copper scrap supply. 

Current mine supply

Currently operating copper mines are expected to provide more than half of the copper required to meet future global demand over the next decade. Even so, we estimate existing mines to be producing around 15% less copper in 2035 than they do today.14  

These mines are already mature and are likely to need additional capital investment to replace or upgrade aging infrastructure or processing facilities. Alternatively, they may take advantage of new technologies that can improve their efficiency or recovery (e.g. converting oxide leaching plants to sulphide leaching, or recovering copper from waste). They are also likely to need to comply with new and higher standards when renewing or extending permits and licences to meet the evolving expectations of communities, customers and regulators. 

Existing copper mines also typically face declining grades, as higher grades are usually mined first, and lower grades are left for later. We estimate the average grade of copper mines has declined by around 40% since 1991. This is partly explained by processing advances, such as SxEw, which have improved the economics of lower-grade deposits and brought them into production. Declining grades also means that more ore needs to be mined, processed and transported to produce the same amount of copper. Without technological advancements, grade decline is likely to further increase production costs on a unit of output basis.

This trend may also increase potential environmental and social impacts, due to increased material movement if throughput is increased to maintain production levels.

We expect between one-third and one-half of global copper supply to face grade decline and ageing challenges over the next decade, which will drive increased unit costs and the requirement for capital reinvestment. While an incredible orebody can make a big difference, many older operations move up the cost curve as they progress through their life cycle. Given the strong demand signals, however, we expect the industry to vigorously pursue options to extend the life of these copper mines. 

One way of overcoming these challenges is with technology. We see examples of incremental productivity improvements from AI-enabled insights in processing, the repurposing or reinvigorating of older facilities with latent capacity, and adoption of new technologies to improve leaching. But it will be difficult to see the impact of these technologies becoming widespread until at least the mid-2030s. Research and development of innovative sulphide leaching technologies is continuing and we expect to see test work and pilot projects improve understanding of their potential. This will allow the industry to evaluate their true capital requirements, and address permitting uncertainty. But in our view, adoption of any primary sulphide leaching technologies into existing operations will need to complement existing processing infrastructure in most life extension and brownfield options, and the economic trade-offs remain unclear at an industry level. For it to be a truly disruptive technology longer term (post 2035), we would also need to see significant advances in scalability, but adoption efforts to date suggest that leaching processes will need to be tailored to individual ore bodies.

Brownfield projects

For current operations with significant resources remaining, brownfield developments will be an attractive response to the challenges outlined above. Based on our project-by-project global review, we expect new brownfield supply to contribute up to 30% of total copper supply by 2035. Today’s pipeline of brownfield projects is healthy, and we see many high-quality options, particularly in Chile.

Brownfield life extensions and expansions benefit from existing infrastructure, facilities, workforce and knowledge, and usually face lower technical risk and uncertainty. However, they are not immune to changing regulatory and community expectations and standards. This can lead to increasing capital intensities, permitting delays and complexities where existing permits do not cover the full life of the project. 

Our recent review of global project capital intensities shows a steady increase in brownfield capital intensity since 2010. When we look at the region with the strongest pipeline of brownfield projects – Latin America – average brownfield capital intensities for the projects sampled show a ~65% increase during that period (in 2024 real dollars), and since 2020, they have approached similar levels to greenfield projects.15 

Our view is that while this increase has been driven by a number of factors, including higher costs for and availability of inputs (e.g. material and labour cost increases, supply chain constraints, skilled labour shortages, and Covid-19 effects), a major factor is that copper producers are, in general, simply building ‘better’ mines (e.g. incorporating newer technologies and addressing higher standards for health, safety and environmental performance).

Despite these cost challenges, we expect high-quality brownfield projects to be prized in the industry in the face of growing copper demand. While their historic cost advantages over greenfield projects are less guaranteed today than in the past, the experience, technical capability developed through years of production and detailed ore body knowledge remain as major advantages, particularly when it comes to more complex projects.

Greenfield projects

Greenfield projects continue to attract significant excitement and interest from developers and investors. They can avoid the challenges of aging facilities and grade decline and can unlock large and higher-grade copper deposits, develop new frontiers, and allow for the application of technology advances without the challenge of retrofitting. 

But they also have potentially even greater challenges to brownfield developments, such as long lead times with environmental and social concerns needing to be navigated for the first time, and uncertainties associated with new jurisdictions or regions. And not all problems can be solved with money. For some projects, it is not a question of investability, but of executability.

The current pipeline of ‘all possible’ greenfield deposits are generally at the higher-difficulty end of the spectrum – and many are experiencing delays. When we investigated a selection of today’s 30 largest (by expected production volume) undeveloped greenfield projects, we found that analysts (ourselves included) had continually moved the forecast supply stack out in time. We expect these projects to contribute around 5 Mtpa of copper by 2035, or 14% of total possible supply.

Start dates for more than 20 of these projects have shown a consistent pattern of delay since 2014, and all have been delayed in forecasts made from 2020 onwards. In 2014, the majority of these projects were forecast to be in operation by now. Given this trend, we now apply a risking adjustment to these projects, which removes between 0.5 to 1 Mtpa from our copper production forecast from 2030 onwards. 

Those that have managed to eventually come online have still seen significant challenges on the journey. Copper mega projects (i.e. those with a capital cost more than US$5 billion) have experienced significant delays and cost overruns (e.g. QB2 and Oyu Tolgoi). 

African greenfield projects, backed largely by Chinese investment, have been the exception to this global trend, delivering a 90% increase in copper production over the last decade at highly competitive capital intensities and execution rates. African deposits also make up eight out of the 10 highest grade deposits discovered since 1990. But in contrast to the porphyry-style deposits common in Latin America, in which mineralisation decreases gradually, African deposits tend to be ‘sediment hosted’, meaning mineralisation is more concentrated with sharp boundaries. This difference drives a more pronounced depletion in our African forecast. However, given recent trends in both discovery and development, we have revised upward our forecasts of expected volumes from the African region, including volumes related to projects or deposits that might, in other regions, be considered immature or insufficiently progressed to include in the forecast.

Despite the potential contribution from African copper, on balance, new greenfield supply globally will struggle to enter the market quickly and cheaply. This is exacerbated by a slowing rate of discoveries and the relatively long average time from discovery to production (17 years in 2023), which is making it less likely that greenfield developments will be able to respond to the strong demand signals. 

According to S&P Global Market Intelligence’s most recent annual copper discovery report, there were:

…239 copper deposits discovered between 1990 and 2023… we have recorded only four discoveries from the past five years (2019–2023), totalling 4.2 Mt of copper… Discoveries from the past decade account for just 14 of the 239 deposits included in the analysis.16  

Capital availability

Capital availability is the other hurdle for copper developers. While challenging to model, given the project-specific nature, we estimate the total bill for all expansion capex from 2025-2034 to be around a quarter of a trillion US dollars (in 2024 real dollars). This represents a significant increase from the previous 10 years, where the total spend on copper projects was approximately US$150 billion. 

In the 1990s and 2000s we saw the impact of Japanese and western investments into copper around the globe, and we have seen significant Chinese investment into African copper projects in the past decade. Political support has often accompanied such investments (in various forms), and sovereign interest in copper from other regions is growing, most notably from the Middle East and with renewed interest from the United States. Given copper’s essential role in economic growth, the energy transition and digital transformation, we would expect sovereign interest and investment to continue to play a role in future copper projects.

Supply prospects are mixed

Taking all of these supply factors into account, we expect currently operating mines will need to work harder for longer, and both brownfield and greenfield projects will face cost and schedule headwinds, arising from skilled labour shortages, project complexity and higher ESG standards. Companies that can best navigate and adapt to these challenges, are experienced in managing more complex projects, and have solid social value credentials and a strong balance sheet will win.

Pricing

The copper price is driven by many factors, such as economic growth, investor sentiment, industrial activity, inventory levels, production costs, exchange rates, interest rates and geopolitical events. In the short term, the price is sensitive to changes in demand and supply, as well as to market sentiment and speculation, which can create price spikes or slumps.17 

However, in the long term, the copper price is more determined by the fundamental supply and demand trends and drivers of the market, such as those we have set out in this blog. To narrow in on potential long-term pricing ranges, we prefer the long-run marginal cost (LRMC)-based inducement model, which seeks to identify the marginal unit of supply that will meet demand in the future, and what it will cost. It assumes new supply will be induced by a price signal that provides a sufficient return for the project. It uses a queue of projects that are ranked by their competitiveness and brings them on until future demand is met. It is the most reliable and consistent method for projecting the trend price of copper over long time periods, based on the fundamentals of demand and supply.18 

The bullish drivers of demand (balanced by the forces of scrap, substitution and thrifting) present a huge task for copper miners. There is a shortage of ‘easy’ projects to replace existing supply and meet this growing copper demand. The projects that are available face new and increasing challenges that we believe will be reflected in their costs, and consequently, in the price required to incentivise their development. We think the price setting marginal tonne will come from either a lower-grade brownfield expansion in a mature jurisdiction, or a higher-grade greenfield in a higher risk and/or emerging jurisdiction. None of these sources of metal is likely to come cheaply, easily, or unfortunately— promptly. 

Appendix

The chart below summarises the flow of copper units from mine through end-of-life capital stock. 

Important notice

This article contains forward–looking statements, which involve risks and uncertainties. Forward-looking statements include all statements other than statements of historical or present facts, including: statements regarding: trends in commodity prices and currency exchange rates; demand for commodities; global market conditions; guidance; reserves and resources and production forecasts; expectations, plans, strategies and objectives of management; our expectations, commitments, targets, goals and objectives with respect to social value or sustainability; climate scenarios; approval of certain projects and consummation of certain transactions; closure, divestment, acquisition or integration of certain assets, operations or facilities (including associated costs or benefits); anticipated production or construction commencement dates; capital expenditure or costs and scheduling; operating costs, and supply of materials and skilled employees; anticipated productive lives of projects, mines and facilities; the availability, implementation and adoption of new technologies; provisions and contingent liabilities; and tax, legal and other regulatory developments.  

Forward–looking statements may be identified by the use of terminology, including, but not limited to, ‘intend’, ‘aim’, ‘ambition’, ‘aspiration’, ‘goal’, ‘target’, ‘prospect’, ‘project’, ‘plan’, ‘pathway’, ‘objective’, ‘see’, ‘anticipate’, ‘estimate’, ‘believe’, ‘expect’, ‘commit’, ‘ensure’, ‘may’, ‘should’, ‘intend’, ‘need’, ‘must’, ‘will’, ‘would’, ‘continue’, ‘forecast’, ‘guidance’, ‘outlook’, ‘trend’ or similar words.  

These statements discuss future expectations or performance, or provide other forward-looking information and are based on the information available as at the date of this article and/or the date of BHP’s scenario analysis processes. BHP cautions against reliance on any forward–looking statements or guidance. 
Additionally, forward–looking statements in this article do not represent guarantees or predictions of future financial or operational performance, and involve known and unknown risks, uncertainties, and other factors, many of which are beyond our control, and which may cause actual results to differ materially from those expressed in the statements contained in this article.  

There are inherent limitations with scenario analysis, and it is difficult to predict which, if any, of the scenarios might eventuate. Scenarios do not constitute definitive outcomes for us. Scenario analysis relies on assumptions that may or may not be, or prove to be, correct and may or may not eventuate, and scenarios may be impacted by additional factors to the assumptions disclosed.  

Except as required by applicable regulations or by law, BHP does not undertake to publicly update or review any forward–looking statements, whether as a result of new information or future events. Past performance cannot be relied on as a guide to future performance.

No offer of securities 

Nothing in this article should be construed as either an offer or a solicitation of an offer to buy or sell BHP securities, or a solicitation of any vote or approval, in any jurisdiction, or be treated or relied upon as a recommendation or advice by BHP. No offer of securities shall be made in the United States absent registration under the U.S. Securities Act of 1933, as amended, or pursuant to an exemption from, or in a transaction not subject to, such registration requirements.

Reliance on third party information 

The views expressed in this article contain information that has been derived from publicly available sources that have not been independently verified. No representation or warranty is made as to the accuracy, completeness, or reliability of the information. This article should not be relied upon as a recommendation or forecast by BHP.

BHP and its subsidiaries 

In this article, the terms ‘BHP’, the ‘Company’, the ‘Group’, ‘BHP Group’, ‘our business’, ‘organisation’, ‘we’, ‘us’ and ‘our’ refer to BHP Group Limited and, except where the context otherwise requires, our subsidiaries. Refer to the ‘Subsidiaries’ note to the Financial Statements in the BHP Annual Report for a list of our significant subsidiaries. Those terms do not include non–operated assets. 

Footnotes

1 Data and events referenced in this article are current as of September 2024.
2 Some aggressive decarbonisation scenarios come in 10 to 15 percentage points higher in terms of end-use electrification than we are assuming in the base case. For a full list of deep decarbonisation scenarios that we track, see
BHP’s Climate Transition Action Plan 2024 Additional information (page 62). 
3 Forecast developed prior to the recent slowdown in EV adoption (ex-China). While the pace of adoption of EVs may underwhelm in the short term, the rationale for electrified transport remains compelling in the long run.
4 Offshore wind requires around 11 tonnes of copper per megawatt, or over 5 times as much as gas-fired power which uses around 2 tonnes per megawatt. Onshore wind and solar are also more copper-intensive, at around 1.7 and 1.4 times, respectively. In addition, the capacity factors of wind and solar power are generally lower than fossil power, which means you need to install more renewable power capacity to generate the same amount of electricity.
5 We estimate copper use in data centres (including those used for cryptocurrency and AI) to be around half a million tonnes of copper today, rising to around three million tonnes in 2050.
6 Note that Copper in power grids is counted under Traditional in the above splits. 
7 Ratio of monthly average of LME Cash Settlement Price for Copper and Aluminium.
8 Global average CO2 footprint (CRU, 2021). Copper: ~4t CO2/t metal. Aluminium: ~13t CO2/t metal.
9 For more detail on the volumes of flows in the copper value chain, see the appendix

10 Please see the appendix for details of the copper cycle.
11 Examples of policies that, while potentially positive in the long run, we believe have hindered/are hindering scrap use in the short term: China’s Operation National Sword and recent review of tax and rebates (‘Fair Competition Review’), EU’s Regulation on Waste Shipments and Critical Raw Materials Act.
12 This assumption is underpinned by EV battery recycling targets, but also requires broader improvement in collection/recovery rates across end uses. This will necessitate changes in consumer behaviour (many consumer goods end up in landfill), as well as improvements in scrap processing and metal recovery. Recycling in many cases is labour and/or opex intensive. Current recycling rates are arguably a reflection of what is economic at current prices, so ‘carrot and stick’ policies will likely be required to alter behaviour and lift these rates.
13 The 10 Mtpa requirement considers: growth in primary copper demand, as well as reductions in current mine supply due to grade decline and resource depletion, and additional consideration for supply disruptions and metallurgical losses. The figure also includes mine life extensions for some currently operating mines.
14 This assumes mine life extensions and probable brownfield projects. 
15 Wood Mackenzie; Q2 2024. Data set adjusted by companies reports and BHP analysis, inclusive of sanctioned projects >50 ktpa copper equivalent. 
16 https://www.spglobal.com/marketintelligence/en/news-insights/research/new-major-copper-discoveries-sparse-amid-shift-away-from-early-stage-exploration 
17 Refer to our 2024 Economic and Commodity Outlook for more details.
18 We recognise that LRMC has some limitations, such as being less helpful for the short and medium term, as it does not capture the cyclical and structural factors that can affect the price. This method is also sensitive to the exogenous assumptions that are imposed, such as the macroeconomic and financial variables, the return thresholds for projects, and the discrete decisions on project inducement. We also recognise that this method does not account for the possibility of price disconnecting from the cost curve, due to extreme tightness or scarcity in the market. Therefore, we also use other methods and models, such as cost-plus, historical average, substitution, probabilistic, and econometric, to complement and cross-check our price forecasts, and to generate alternative price scenarios and ranges to reflect the uncertainty and variability of the market.



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7 10, 2024

XAG/USD tumbles below $32 on blowout US jobs data

By |2024-10-07T22:33:25+03:00October 7, 2024|Forex News, News|0 Comments


  • Silver price falls sharply below $32.00 as US bond yields rise further.
  • Surprisingly upbeat US NFP data forced traders to pare Fed large rate cut bets.
  • Middle East tensions are expected to offer support to the Silver price.

Silver price (XAG/USD) extends its downside below $32.00 in Monday’s European session. The white metal weakens as the US bond yields rise further, given that the likelihood of the Federal Reserve (Fed) delivering another larger-than-usual 50 basis points (bps) interest rate cut in November has gone off the table.

10-year US Treasury yields jump slightly above 4%. Higher yields on interest-bearing assets reduce the opportunity cost of holding an investment in non-yielding assets, such as Silver. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, clings to gains near 102.50.

However, the Silver is unlikely to turn extremely bearish amid growing tensions between Iran and Israel. Historically, geopolitical tensions improve demand for precious metals as a safe haven.

Market speculation for Fed large rate cuts waned after the United States (US) employment report for September showed strong labor demand and robust wage growth. Traders are pricing a Fed 25 bps interest rate cut in November, according to the CME FedWatch tool.

Upbeat labor market data has diminished fears of an economic slowdown, which forced traders to be bet for a second consecutive 50 bps interest rate cut in September.

Going forward, the next move in the Silver price will be influenced by the US Consumer Price Index (CPI) data for September, which will be published on Thursday. Economists expect the core CPI – which excludes volatile food and energy prices – to have grown steadily by 3.2%.

Silver technical analysis

Silver price continues to face pressure near the horizontal resistance plotted from the May 20 high of $32.50 on a daily timeframe. The white metal strives for more upside as the outlook is upbeat due to upward-sloping 20 and 50-day Exponential Moving Averages (EMAs), which trade around $31.00 and $30.00, respectively.

The 14-day Relative Strength Index (RSI) remains in the bullish range of 60.00-80.00, suggesting more upside ahead.

Silver daily chart

Silver FAQs

Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.

Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold’s. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.

Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.

Silver prices tend to follow Gold’s moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.

 



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7 10, 2024

XAU/USD ranges around $2,650, awaits fresh clues

By |2024-10-07T20:31:57+03:00October 7, 2024|Forex News, News|0 Comments


XAU/USD Current price: $2,646.55

  • The macroeconomic calendar features the United States Consumer Price Index.
  • Escalating Middle East tensions undermine the market’s mood at the beginning of the week.
  • XAU/USD holds on to familiar levels, but buyers are far from giving up.

Spot Gold’s consolidative phase continued throughout the first half of Monday after the noisy United States (US) Nonfarm Payrolls (NFP) report released last Friday. XAU/USD found near-term demand at the beginning of the week as Middle East tensions undermined the market’s mood. Nevertheless, the bright metal turned south early in the American session, as the US Dollar benefits from solid US data supporting the case for a slow pace of interest rate cuts.

The Federal Reserve (Fed) kick-started its monetary loosening cycle with a 50 basis points (bps) interest rate cut in September, prompting bets of similar moves coming in the near term. However, stronger-than-anticipated employment-related data cooled such concerns. The US Dollar recovered its poise and lost its bearish way, as investors no longer fear a recession, not even a soft landing in the foreseeable future.

The macroeconomic calendar had nothing relevant to offer at the beginning of the week, but it will feature the US Consumer Price Index (CPI) and the Federal Open Market Committee (FOMC) Meeting Minutes. Inflation has cooled enough to push the Fed into monetary loosening, and unless the figures bring an unexpected surprise, the US central bank is expected to keep tightening at a slow yet constant pace. As for FOMC Minutes, the document will likely have a limited impact on financial markets, as all has been said and done in the September Fed’s announcement and the Summary of Economic Projections (SEP) released alongside.

XAU/USD short-term technical outlook  

The daily chart for XAU/USD shows the pair is pressuring the base of a near-term wedge but holding within the figure. The pair is also developing above all its moving averages, with the 20 Simple Moving Average (SMA) heading firmly north at around $2,616. The 100 and 200 SMAs maintain their bullish slopes, yet roughly $200 below the shorter one. Finally, the Momentum indicator turned flat within positive levels, while the Relative Strength Index (RSI) indicator aims lower at around 63, correcting overbought conditions and far from supporting another leg south.

The near-term picture is neutral-to-bearish, although a slide below the $2,638 region is required to confirm a continued slide. A mildly bearish 20 SMA provides intraday resistance at around $2,652, while technical indicators develop within negative levels, although lacking clear directional strength. On a positive note, the 100 and 200 SMAs maintain their upward slopes below the current level, suggesting buyers have paused but not yet given up.

Support levels: 2,638.10 2,624.50 2,616.00

Resistance levels: 2,652.10 2,663.00 2,673.20



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7 10, 2024

Metals & Mining | S&P Global

By |2024-10-07T12:26:01+03:00October 7, 2024|Forex News, News|0 Comments


Access proprietary mining insights, investment research, and third-party news sources from Dow Jones Newswires, and Nikkei News. Our comprehensive, real-time global mining news integrates financial and industry-specific data in our articles so you can easily turn information into actionable insights. Our mining news is accessible on web and mobile platforms, news feeds, and email alerts. Our topics range from operations and strategy, mergers and acquisitions, capital markets, ESG, and project developments in the mining industry.



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