A lot of the strength in copper hinges on China, and the country’s central bank could help catapult copper prices higher given its latest policy moves.
China cut its bank reserves requirement to help spur economic growth, and hopefully industrial metals can benefit. Copper prices started the trading week on the right foot.
“Copper prices were given a boost on Monday as top metals consumer China cut its bank reserves requirement, fanning hopes for stronger economic growth and industrial metals demand,” Reuters reports. “Three-month copper on the London Metal Exchange (LME) had gained 1% to $9,509 a tonne by 1700 GMT after trading in the red earlier in the session and having dropped by 0.8% on Friday.”
One potential headwind is having enough supply to meet demand. This is especially the case given the shift to renewable energy sources, which will create additional demands for copper.
“The stimulus measure is expected to support economic growth, with recent tighter credit conditions impacting the property sector, a key copper consumer,” said CRU analyst Craig Lang. “The global copper market still faces the challenge of finding the additional supply required over the medium-to-longer term to meet the demand from renewable energy applications and electric vehicles.”
A Copper ETF to Capture Upside
Rather than playing copper directly where commodity prices can fluctuate wildly when buying-selling activity is heavy, investors can play exchange traded funds (ETFs) that focus on copper mining. One such fund is the Global X Copper Miners ETF (COPX).
COPX seeks to provide investment results that correspond generally to the price and yield performance of the Solactive Global Copper Miners Total Return Index, which is designed to measure broad-based equity market performance of global companies involved in the copper mining industry. The fund is up over 30% so far this year.
The fund is up close to 18% for the year despite it recently falling below its 50- and 200-day moving averages. For investors looking for an area of value to purchase COPX on the dip, now could be an opportune time.
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