During the last week aluminum quotes were pulling back from monthly highs. As a result, prices fell by almost 4%. Meanwhile, yesterday the intraday drawdown to the level of 2320 was bought back, and the aluminum has a chance for another upside wave without having to test the support at 2260. If the U.S. labor market statistics for March today will not be significantly worse than expected, the next week for aluminum might be more optimistic than this week.
Concerns about recession in the world economy are still the main negative factor for aluminum prices. However, metal consumption in China is showing stability and aluminum bullion inventories are trending downward. Productivity in the manufacturing and refining sectors is expected to maintain a slight growth in the short term. The stability of consumption in China may provide some support to aluminum prices.
One of the world's leading commodity traders Trafigura expects the growth in demand for industrial metals due to the development of Chinese economy. The acceleration of the energy transition amid limited metal supply is also a positive factor for aluminum prices.
Experts from one of the largest investment banks in the world Goldman Sachs expect aluminum prices to increase during the year. According to analysts, the aluminum market is moving into a deficit. Metal reserves will decrease significantly in the second half of this year. The trend will continue in 2024. Strategists of the bank forecast the average cost of aluminum at the level of $4,500 per ton by 2024. The estimate for 2025 is $5,000 per ton.
The strategy to buy aluminum near 2320 looks like an interesting option. The main growth target is the recent local highs above 2400. The scenario of rise in quotes will be cancelled in case of breakdown of the support at 2260, but such situation is unlikely without new strongly negative triggers.
The following trading strategy option can be suggested:
Buy aluminum in the range of 2300-2340. Take profit – 2400. Stop loss – 2260.
Also, traders may use Trailing stop instead of a fixed Stop loss at their convenience.
This content is for informational purposes only and is not intended to be investing advice.