financial market implosion on the way, page-7

Copper has me in two minds at the moment.

Yes, technically, it looks set to fall off a cliff. The price of copper is historically unstable and its chart is incredibly bearish right now, all things considered. However, what is it that drives the price of copper? Traders, or physical supply/demand economics? Yes traders can speculate on the future value of a sales contract, but let's be realistic here. Copper falling to $1.50/lb would make the upper quarter of copper production uneconomic on a C1 cost basis. Factor in overheads and we would probably find that at least one third of copper mining companies would be running on huge losses at a sales price of $1.50/lb. This would create a huge deficit in copper supply and price would bounce park very sharply ala 2009.

Personally I think she will fall over the next year, but it should be able to find support around the $2.50-$2.75 per pound mark, picking up the lows of 2007 and 2010 as a platform to rest on.

Then if we look at gold, most companies are struggling to keep their C1 costs below $800/oz. Its a similar story to copper; yes the charts may suggest that it is in a bearish condition, but the underlying supply/demand economics of the metal are still there. Stock market falls, we historically all go for physical gold as a safe haven. The demand is there for the product, hence any fall to even lower prices will cause a mass shortfall in supply.

The big casualties over the next year will be the mid cap resource stocks imo. The big guys are effectively price makers, while the little ones out there such as OZL, SFR and CDU have to put up with the prices they are offered to sell at. Right now they're running very borderline on a profit/loss basis. If copper, for example, drops much further then your OZLs, CDUs and SFRs will have a hard time keeping the market interested.