By Giles Coghlan, Chief Currency Analyst at HYCM
Gov’t support to boost Copper prices?
Eurasia Group’s director of energy, climate and resources sees the COVID-19 pandemic as making the way for an ‘age of copper’. This popularity of copper is expected in the coming weeks and months. The main reason for this is due to governments being expected to increase in supported environmental investments. According to Eurasia’s group Henning Gloystein, ‘huge green and digital stimulus programs, especially in Asia and Europe, will create the conditions for a boom in copper demand – electric vehicles, 5G networks, and renewable power generation’. This is what is expected to fuel the so called age of copper. So, where are copper prices now?
Copper sitting under $6000
The big round number of $6000 has been containing copper prices on the London Metal Exchange for some time now. Falling demand for copper prices, due to the COVID-19 outbreak has kept prices under $6000.
Furthermore, be aware that the risks of at least isolated pockets of COVID-19 outbreaks remain in place and that can result in further slumps in copper in the near term. However, at the time of writing there are no expectations that full scale lockdowns like we have experienced will return.
China’s top copper traders sees upside for Copper
The director of Maike Metals International Ltd, He Jinbi, said in a phone interview with Bloomberg that, ‘the pandemic will end and we have already seen the worst’. According to He, an experienced veteran copper trader after establishing Maike in Western China in 1993, copper could trade between $5800 and $6300 through 3Q. He cited the very large levels of monetary support to likely deliver more gains for copper throughout the year. Furthermore, according to He, the recovery in prices have been driven by consumption rather than speculation. A good sign.
Copper is gaining appeal with a number of Wall St banks like Goldman Sachs and Morgan Stanley favouring more upside in the metal over the second half of this year and into next. See the price chart below with any pullbacks lower looking suitable for buying dips. Also, copper futures can be traded, but trades need to be aware that the position cannot be held for many months due to a rollover expiry. Therefore, check if that will suit your requirements. Another alternative is a Copper derived ETF that will not be subject to the same rollover issue.
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