{"id":18588,"date":"2021-06-22T07:30:00","date_gmt":"2021-06-22T11:30:00","guid":{"rendered":"https:\/\/www.jeffclarktrader.com\/?p=18588"},"modified":"2021-06-22T07:30:00","modified_gmt":"2021-06-22T11:30:00","slug":"chinas-plan-to-kill-the-commodity-rally","status":"publish","type":"post","link":"https:\/\/jeffclarktrader.com\/market-minute\/chinas-plan-to-kill-the-commodity-rally\/","title":{"rendered":"China’s Plan to Kill the Commodity Rally"},"content":{"rendered":"

Commodity prices have taken a step back recently, and investors have noticed… For example, the Bloomberg All Metals Index has fallen 8% in just three weeks since its high on May 31. <\/p>\n

A lot of this has to do with China’s all-out assault on rising commodity prices that began in late May.<\/p>\n

But, all its policies have really done is break the short-term<\/em> price trend… setting up a better buying opportunity for the “trade of the year<\/a>” that continues to be commodities.<\/p>\n

China’s fear is easy to understand – if higher commodity costs get passed down to consumers, it’ll eventually stall their economic recovery…<\/p>\n

In just the last three weeks alone, China has announced three new measures to try to end the year-long commodity rally.<\/p>\n

I talked about the first one in early June<\/a>, with the PBOC’s (People’s Bank of China) announcement in late May that forced financial institutions to increase their foreign currency reserves.<\/p>\n

This was the catalyst that created a short-term bottom in the dollar and kickstarted the decline in dollar-sensitive commodities like metals. (Jeff Clark\u2019s Delta Report<\/em> subscribers have benefited from this decline recently, booking a 58% gain on the Invesco DB U.S. Dollar Index.) <\/p>\n

The other two moves were both announced last week…<\/p>\n

First, state-owned enterprises were ordered to limit their speculative commodity exposure, and they’ll need to report their futures positions to the state.<\/p>\n

In a second development, the National Food and Strategic Reserves Administration will soon release state stockpiles of metals like copper, aluminum, and zinc. The anticipation of a short-term supply shock sent a very bearish<\/a> signal… with copper now down almost 14% from its highs.<\/p>\n

The problem with China’s approach is that it’s no longer the only buyer that can incrementally move prices…<\/p>\n\n\n\n
\n

Free Trading Resources<\/strong><\/p>\n

Have you checked out Jeff’s free trading resources on his website? It contains a selection of special reports, training videos, and a full trading glossary to help kickstart your trading career \u2013 at zero cost to you. Just click here<\/a> to check it out.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Commodities Will Move Higher Regardless of China<\/strong><\/h2>\n

In the past, China was able to dictate where prices went because it had been the incremental buyer of metals, energy, and agricultural products. It’s a large economy that’s been growing by leaps and bounds.<\/p>\n

But now, demand is coming from elsewhere…<\/p>\n

This time, policies in the U.S. are creating the incremental demand.<\/p>\n

For the first time in decades, the economy is undergoing a demand shock from both monetary (money printing from the Federal Reserve) and fiscal stimulus through unemployment benefits, tax credits, and infrastructure spending.<\/p>\n

By placing stimulus dollars directly in the hands of the consumer, and investing into infrastructure, the U.S. has insured that commodities will continue to move upward – regardless of China’s short-term fix.<\/p>\n

Yet, metals have suffered a dramatic decline during this stretch… even though this is exactly the sector that’ll benefit most from the continued economic recovery and recently proposed infrastructure bills.<\/p>\n

For example, platinum has now fallen 20% since early May – when speculation of these announcements from China began.<\/p>\n

Just take a look…<\/p>\n

\"\"<\/p>\n

(Click here to expand image)<\/a><\/p>\n

It’s now back to pre-pandemic levels of $1,050\/ troy ounce. Considering how platinum is a key metal in the production of electric vehicles – an industry with demand only pointing upward – prices are at a bargain.<\/p>\n

Given the extreme price pullback in these industrial metals, investors can benefit by getting direct exposure through the Aberdeen Standard Physical Platinum Shares ETF (PPLT).<\/p>\n

PPLT recently broke through its 200-day moving average<\/a>, but is making a run at recapturing that technical level. Platinum\u2019s pre-pandemic price level should provide strong support, so I fully expect a 10% move higher to retest its 50-day moving average. <\/p>\n

Regards,<\/p>\n

Eric Shamilov
\nContributing Editor, Market Minute<\/em><\/p>\n

Reader Mailbag<\/strong><\/h2>\n

What do you think about China’s decreasing control over commodities prices? Do you think this recent news is setting up a buying opportunity in metals?<\/p>\n

Let us know your thoughts – and any questions you have – at feedback@jeffclarktrader.com<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

There are three measures to end the rally…<\/p>\n","protected":false},"author":25,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"ep_exclude_from_search":false,"service":"","footnotes":""},"categories":[1],"tags":[],"publication":[10],"person":[13],"newsletter-type":[],"ticker":[],"class_list":["post-18588","post","type-post","status-publish","format-standard","hentry","category-market-minute","publication-market-minute","person-eric-shamilov"],"acf":[],"_links":{"self":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/18588","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/users\/25"}],"replies":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/comments?post=18588"}],"version-history":[{"count":0,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/18588\/revisions"}],"wp:attachment":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/media?parent=18588"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/categories?post=18588"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/tags?post=18588"},{"taxonomy":"publication","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/publication?post=18588"},{"taxonomy":"person","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/person?post=18588"},{"taxonomy":"newsletter-type","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/newsletter-type?post=18588"},{"taxonomy":"ticker","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/ticker?post=18588"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}