Copper and the future.
Investors continue to keep a watchful eye on Copper prices as a barometer to gauge the state of the world economy. “Dr. Copper” has always kept the pulse of global growth and one of his biggest patients, China, may be feeling a bit under the weather. It’s a common assumption that “how goes growth in China so goes the price of Copper”. Optimism the last few years over China GDP, that had fed a rally in Copper prices, has faded leading to fears of a slowdown. More recent developments in the ongoing trade dispute between the U.S. and China continue to have traders on edge. Any escalation leading to a prolonged trade war would be negative headwinds on the Chinese economy further slowing growth prospects and the demand for Copper.
Typical precious metals like Gold offer investors a safe haven investment alternative to diversify risk in their portfolios. Copper, on the other hand, is a commodity that has its value in its industrial manufacturing uses. Copper wiring, roofing, plumbing, and electronics lead its use with China providing almost half the global demand. Fears of an already slowing Chinese economy in 2018 coupled with the recent trade tensions have helped pushed prices down 20% since early June.
On the supply side there are issues that can also contribute to price swings. With 40% of world Copper production coming from Chile and Peru, any regional political developments can impact prices. Government instability, worker strikes, and unpredictable mining costs can create production disruptions and uncertainty in prices.
Copper futures trade in New York, London, and Shanghai and have become a popular play with speculators which has contributed to the market’s volatility. The New York Comex contract (HG) trades 23 hours a day on CME.Technicals:
The charts for the December (HGZ18) show the market fighting to form a bottom at the 2.60 level with longer-term support at 2.50. To the upside the market is testing the 50-day moving average at the 2.73 mark with further resistance at 2.78 and 2.89.
20-Day SMA 2.67 / 50-Day SMA 2.73 / 200-Day SMA 3.06 / 14-Day RSI: 54%
Moving forward market participants will continue to monitor Copper to get a feel for the direction of the global economy. Any indications of a change in the longer-term outlook for Chinese growth will impact prices. In the near-term, developments in the ongoing trade dispute between the U.S. and China will have more immediate impacts. How much has already been priced into the market? How much is just rhetoric and positioning for any future agreements? What would be the effects of further escalations? Stay tuned for further developments.
Typical precious metals like Gold offer investors a safe haven investment alternative to diversify risk in their portfolios. Copper, on the other hand, is a commodity that has its value in its industrial manufacturing uses. Copper wiring, roofing, plumbing, and electronics lead its use with China providing almost half the global demand. Fears of an already slowing Chinese economy in 2018 coupled with the recent trade tensions have helped pushed prices down 20% since early June.On the supply side there are issues that can also contribute to price swings. With 40% of world Copper production coming from Chile and Peru, any regional political developments can impact prices. Government instability, worker strikes, and unpredictable mining costs can create production disruptions and uncertainty in prices.Copper futures trade in New York, London, and Shanghai and have become a popular play with speculators which has contributed to the market’s volatility. The New York Comex contract (HG) trades 23 hours a day on CME.Technicals:The charts for the December (HGZ18) show the market fighting to form a bottom at the 2.60 level with longer-term support at 2.50. To the upside the market is testing the 50-day moving average at the 2.73 mark with further resistance at 2.78 and 2.89.
20-Day SMA 2.67 / 50-Day SMA 2.73 / 200-Day SMA 3.06 / 14-Day RSI: 54%
Moving forward market participants will continue to monitor Copper to get a feel for the direction of the global economy. Any indications of a change in the longer-term outlook for Chinese growth will impact prices. In the near-term, developments in the ongoing trade dispute between the U.S. and China will have more immediate impacts. How much has already been priced into the market? How much is just rhetoric and positioning for any future agreements? What would be the effects of further escalations? Stay tuned for further developments.
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