Expectations of a surplus in 2013 are quickly being revised after supply has been curbed by a number of recent mine collapses. Most recently the collapse of a tunnel at the world’s second largest copper mine, Grasberg in Indonesia, has potentially halted production for 2 months as investigations over the cause are completed.
Against the backdrop of an earlier mine wall collapse at Rio Tinto’s Bingham Canyon mine in Utah and simmering wage tensions in Chile, the copper market is likely to end 2013 in deficit unless new mine production can fill the breach.
Meanwhile, ETFS Nickel (NICK) has seen the largest inflows in over 3 years after reports of China’s State Reserve Bureau (SRB) buying around 30 thousand tonnes of nickel.
Physical gold ETPs see the 10th consecutive weekly outflows as investors expect Fed to cut bond purchases. ETP investors continued to cut gold holdings last week, with gold ETPs seeing outflows of US$108 mn.
The gold price dropped below US $1,400/oz. as the US Dollar strengthened against most G10 currencies following the robust US jobs numbers on Friday.
Investors have clearly positioned for the beginning of a tapering of the US central banks’ stimulus activities, believing the US economy is reaching a self-sustaining point in the recovery.
ETFS Leveraged Natural Gas (LNGA) bucked the energy sector trend, posting US$5.2mn inflows. Despite a sharp decline in prices as US stockpiles rose last week, inflows into LNGA were the first in 4 weeks.
Oil ETPs meanwhile recorded US$1 0.9mn outflows as oil prices rose, indicating range trading continues.
Key events to watch this week. All eyes will be on the Bank of Japan for any further guidance on policy. With a relatively light data week, all eyes will be on the Bank of Japan for any further guidance on policy. After the Q1 GDP growth upside surprise, there is reason for the BoJ to remain confident in its current policy experiment. US and Euro area industrial production data will give a guide as to the divergent growth path of the two regions.