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Investors have positioned themselves heavily for higher interest rates and a stronger dollar, but that is precisely why a reversal may be near. At the same time, supply problems in the copper market are mounting, leaving copper stocks poised for a sharp rise, according to Jack Hoogland.
Futures traders have recently positioned themselves heavily for rising interest rates and a stronger dollar. When everyone has already bet on an increase or decrease in any given investment, it is usually an indication that the opposite is about to happen. The tweet below shows that positioning in the futures market is extremely hawkish on both the dollar and interest rates.
In this case, it gives us very good reason to expect lower interest rates and a weaker dollar in the coming months. That creates a perfect setup for gold, silver, uranium and copper. We strongly suspect that copper could rise particularly sharply once fears of (further) interest rate hikes subside.
After all, we have recently seen one report after another about supply problems. The tweet below shows that global production in the previous quarter was estimated to be as much as 10% lower than a year earlier. 
On top of that, a severe winter storm in Chile caused further problems last week.
Furthermore, not only uranium producers but also some copper producers are being affected by the global shortage of sulfuric acid.
The tweet below refers to an IEA report stating that more than 15% of global copper production depends on sulfuric acid.
Earlier this month, I explained how Ukrainian strikes on Russian oil refineries in particular are causing a global shortage of sulfuric acid.
Those strikes are continuing unabated for the time being, causing the copper market to become increasingly tight.
Inventories approaching zero
The unprecedented tightness in the copper market is already clearly visible in the tweet below.
Copper inventories on the London Metal Exchange are rapidly falling towards zero, while a copper shortage in China is creating excess smelting capacity, resulting in the lowest treatment charges in years.
It is hard to imagine a tighter market than this! Copper stocks feel like a compressed spring that could release at any moment. The likelihood of extremely sharp price increases is rising rapidly!
Jack Hoogland worked for the American bank Citigroup in Amsterdam, Düsseldorf, Madrid and Brussels as a Financial Analyst, Risk Manager and Finance Director. Jack has followed the financial markets since the late 1980s and increasingly shifted his focus towards macroeconomics and the financial system following the global financial crisis. Read more from Jack Hoogland.
