Vince Lanci: The COMEX Copper Squeeze Is Here | Arcadia Economics

Copper. COMEX is going wild and the relative performance of COMEX vs London or Shanghai is quite glaring. The high-owned COMEX is equivalent to $11,176 a tonne, more than $1,000 above the benchmark contract on the London metal exchange. Seems like a real scramble for physical shorts and COMEX, but this kind of range expansion after a big rally should be something we should watch cautiously. Welcome to the Morning Markets and Metals with Vince Lancy, where each day he brings you the precious metals and financial news to get you ready for your day. And now, here’s Vince.

I’m Vince Lancy. Today’s morning meeting we’ll be discussing copper. Everything is going to be about copper today. So if you already understand copper, then just kick back and relax. If you’re relatively new to copper or you will be looking through a lens of say gold or silver or even oil, this should give you an idea of what the hell is going on and allow you to jump right on the bandwagon and understand this market pretty well. All right. Start with the markets though. The dollar is down $15 at $104.87. $10 year yield scald is $23.64, up six and change.

Silver $20.81, up 19 cents. I mean, sorry, copper is COMEX copper. It’s important to say it that way. COMEX copper is $4.96, up nine cents at basically it was about over three and a half percent, I think. Now it’s up a little under two percent. So it’s fading off of its highs. Like it did yesterday. WTI is down 86 cents at $2.77. $7.77 natural gas is $2.25. You know, up two cents. Bitcoin is up $8.58 at $6.2387. Ethereum is $28.97, up $15. Platinum, Palladium both up about $14, $9.92, and $10.44 that’s Palladium and Platinum.

Grains are all up with wheat leading up 10 cents at $6.89. Soybeans 12.10, up six and change, and corn in the rear at $4.58, up two cents. Okay, so let’s get right to it. Here’s the front page. I repin this story because people are talking about gold correlations again. That’s the answer, Kate. Zoltan Pozo, we don’t subscribe to his stuff, but we have a nice summary of his work there. And here’s CPI prep that just came out. We sent that out. You’ll probably have CPI out already by the time you see this.

Copper, the copper home X squeeze is here. No hedging there. That’s what this is. Okay. All right. In premium, we have copper today. And in the commentary that you’re about to see, that’s going to be about copper as well, specifically about Goldman Bank of America. They nailed this. They really have. Okay. Just get to it. What is going on with copper? Well, first, the fundamentals are asserting themselves. Second, the AI craze is caught up with the real play, which is increased demand for power. Third, Goldman and Beoway foretold this as recently as last month.

And we’re going to start with some art. Before we do the art, I’ll just go through these three bullets. The fundamentals assert while there’s not enough copper for the demand that’s out there. We’ve all known this for years, right? But these things don’t matter until they matter. And now they matter. The tipping point concept, the overnight success that was 10 years in the making. This is how it happens. The AI craze has caught up to the real play, which is increased demand for power. We can call this the catalyst that made people aware of the fundamentals.

The catalyst is everyone’s talking about AI, the browser, the AI, the this, the that, and that, you know, all the, all the, all the flash. Well, people are going, well, where’s this going? You know, in general, they’re finally figuring out, well, where is this going to come from? This takes a lot more power, right? It’s an infrastructure play. AI is an infrastructure play for power, which is a copper play. Okay. It’s not AI that’s making this go up. It’s AI that has sensitized the world to the lack of copper we have, you know? Climate change isn’t a big problem anymore.

So copper should be going down, right? Uh-uh. Copper goes up because everyone’s talking about the need for spending now. Goldman and BOA foretold this as recently as last month. Now, Goldman’s been bullish off and on for copper for the last two years, and it’s all part of their, uh, uh, their super cycle concept. Uh, and the key, the key for Goldman is when the spreads backward date, they get bullish. They do this a lot in oil, uh, and they do it on occasion in copper. Bank of America, uh, much more fundamental approach, uh, towards this.

There’s not enough supply. There’s too much demand. We have both of those reports for you. Uh, we’ve sent them out before we’re going to send them out again since it’s a current event. Uh, but these guys had updated their opinion as recently as last month. So you almost can see them having lunch with each other talking about this. Anyway, we’re going to talk about that, but let’s look at the art to give you some perspective. All right. This is a COMEX short squeeze. Remember what happened in silver and gold in 2020 during COVID? The yellow line, wait, the yellow line, I’m sorry.

I have these stupid glasses on. The yellow line is LME copper, right? The orange line is COMEX copper. That’s a daily chart. As you can see, they mirror themselves. They mirror each other very closely. This is a daily chart. So starting a couple of days ago, it just broke away and took off. So there’s your perspective. LME is not following, uh, COMEX. So this is COMEX copper. So they need the metal on the COMEX for some reason. Shorts are short collateral. We’ll get into the why some other time. Next. Here’s an example of it in the monthly.

Okay. COMEX copper is the orange line. All right. LME copper is the, uh, candle. Now that’s the monthly. So just go back for a second. The daily is that spread. The monthly is essentially the same spread. Let’s go. This has all happened in the last three days. Look at this market. They correlate with each other almost a hundred percent going back a decade. Okay. So this is very real. Uh, so there’s your charts to give you some perspective on how to look at this. Oh, we’ll go to the news in a second.

Let’s start with Goldman as recent as yesterday. Copper COMEX is going wild and the relative performance of COMEX versus London or Shanghai is quite glaring. The high on COMEX is equivalent to 11, one 76 a ton more than $1,000 above the benchmark contract on the London metal exchange. Seems like a real scramble for physical shorts and COMEX, but this kind of range expansion after a big rally should be something we should watch cautiously. Remember what happened with, uh, LME nickel. Okay. Keep going. See this chart, this is their prediction a month ago that copper would be up, you know, 50% in a year.

It’s not a very good chart on this, on the screen here, but we’re pretty much 50% to where they want to be a year from now. So, you know, it’s a little bit over over overheated. All right. A tight physical market. This is the main reason things are going on here. The report has a lot more, but I’ll read you one of the paragraphs. A tight physical market structural supply shock combined with an improving global demand environment is set to put the copper market in its tightest state since 2021. This was written last month, April 15th, I think a combination of mine supply disruptions, already low inventories and seasonality should put the market in a deficit phase from Q2 onwards till year end.

Globally Goldman Sachs sees the copper demand increasing by 2.4% in 2024. And our economists continue to continue to target 10,000 per ton by year end and 12,000 per ton by end of 25 as scarcity pressures continue. That’s Goldman. That continues at the bottom. Bank of America last month, massive report on metals. We sent that out to premium subscribers. And, you know, with gold making new all-time highs and silver starting to catch fire, their title piece was the copper supply crisis is here. Significant. We sent that out. Tight copper mine supply is increasingly constrained refined production, constraining refined production.

The much discussed lack of mine projects is finally starting to bite. Similarly, aluminum production growth has halved. Keeping in mind the steady demand backdrop, we are therefore bullish both metals and see copper and aluminum, aluminum, rising to an average of 12,000 a ton, 544 pound and 325, 350 a ton by 2026. China dialing back on its green investment is a key risk to that bullish forecast. We also expect a zinc deficit this year as mine supply is likely to disappoint. Moving that below. Okay. Just a quick comment. The key to all this globally, okay, is there’s too much demand and not enough supply.

You have countries, this everything I’m saying now applies to gold and silver as well. But with copper, it gets, it tends to be harder to tamp down because it’s a globally used commodity that’s not recycled very much. I’m not saying that silver is, but you get the point. The world needs more copper, right? You’ve got three exchanges, Shanghai, LME and New York. And if you’re a player, not even a player, if you’re the market, you find the exchange where the most shorts are, you drive the market higher. And if there’s no collateral available, what does that mean? It means China has been buying copper for years.

There is no copper available to carry your shorts to find to make delivery. And it’s what you’re seeing in silver and gold all the time, but it’s happening at a much surprise type of rate. So that’s what’s going on. The longs are in Shanghai, the neutrals are in LME, the shorts are in COMEX. And there you have it. Interestingly enough, just as an aside, who’s always short copper? CTAs. Who’s not short copper this time? CTAs. CTAs are long copper, so good for them. They make money. They make money sometimes, a lot of money.

Okay. So there’s, you know, there’s going to be a move to tamp this down. They’re going to find supply. The copper’s out there. Just remember that this is not going to be a one and done thing. If they don’t, if they don’t let this go to the moon, it won’t be a one and done thing. It’s going to be a series of rolling squeezes. Okay. It’s going to keep rolling. Very similar to the meme stock craze right now. And actually for similar reasons, when the macro backdrop, financial conditions are easing. And so it’s making it easier to do these things.

And you know, this is a genuine problem. In the news, Anglo-American plans to break itself up to win over shareholders as the mining group seeks to fend off a 34 billion pound takeover approach from rival BHP. All right. They’re going to split their copper out from their gold and you’re going to see the industries move violently on this, not because of the price today. It’s been happening for a while. Copper and gold, gold stocks haven’t been doing. Gold hasn’t been doing as well as copper in terms of the mining area. And as a result, there’s going to be a breakup of gold and copper miners to free the copper up to let it appreciate.

That’s the diamond. Gold is the diamond. I mean, copper is the diamond right now. And then you’re also going to see gold miners elsewhere look to buy copper deposits. So I think that’s obviously very important. And these are two of the biggest players. Feral Chair elsewhere, right? Federal Reserve Chair Jerome Powell from the central banks plans to hold interest rates at its highest level and more than two decades. Remember, December, things are looking good. I might cut January. Everyone thinks you can cut six times. And now here we are in May and they’re pretty much looking like they might not cut it all.

Now that could change after CPI today. But if you look back and it’s a hindsight statement, he never wanted to cut. He just wanted to give the impression so no one seems politically biased that he wanted to let everyone know that, hey, if it’s wanted to cut, he’ll cut. And the market, of course, drug addict that it is took it further. Next, President Joe Biden is sharply raising tariffs on Chinese imports. Well, that’s bullish copper. That’s bullish silver. And it’s also bearish quality of American goods being made. Corporate jobs are being axed at Walmart, AI.

That’s not AI directly, but you get it. Boeing is violated deferred prosecution. OK, so big business is being taken down. That’s it. I’m Vince. Let’s take another quick look at copper, right? Since everyone’s everyone’s we’re all enjoying that so much. Let me get rid of this. There’s the weekly. Let’s go. Let’s zoom in a little bit so we can see what’s going on an hourly basis. Right. So we got as high as five oh eight eight. OK, so there’s going to be some psychological play in the 500 area. I don’t know. I don’t have a good feel for this technically, except to say golden silver.

What’s happening in copper is what can happen in silver. It’s what has happened in silver. But in copper, it’s going to take time to come out. So where they won’t let this go on too long or put it this way, they won’t let us go until and if it gets out of hand, they won’t be able to stop it. Silver and gold are up. I would call that in sympathy with copper because anyone who’s getting killed on COMEX right now in copper is saying maybe I shouldn’t be short silver. Maybe I shouldn’t be short gold.

So risk managers are closing positions everywhere. And to the extent that people have too big a position, you’re going to see silver and gold rally. So unless silver is up 55 cents today, then I would say that there’s not enough shorts and silver to make this be a problem, at least on COMEX today. Right. Gold is up $5. What’s been up strong? These are these two markets have been up strong in general. The point is there aren’t a lot of shorts in these markets. So don’t go buying silver because copper is up. You want to just keep an eye on things.

I’m Vince. Have a great day. Thanks for watching this morning’s markets and metals update with Vince Lancy brought to you each day by Myles Franklin Precious Metals where this week’s special is one ounce gold Australian kangaroos for only $59 over spot. Gold Australian kangaroos are one of the coins coming from one of the six sovereign mints. And with the gold price pulling back recently, you can get your Australian kangaroos at only $59 over spot by emailing our Katie at milesfranklin.com or calling 833-326-4653. Please note that this video is not intended as legal licensed financial trading advice and is to be used for informational purposes only.

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