Copper exchange traded funds have benefited this week from a weaker dollar and improved sentiment on the global economy and the Eurozone debt crisis due to signs central banks will do more to ease stress in the financial system.
Global copper inventories are down to an 11-month low while prices have gotten a boost this week on news China has lowered the reserve requirements for its banks.
“Consumption growth will be positive,” Angus Staines, an analyst at UBS AG in London, said. “Credit in China will be easier to acquire and that will allow businesses to build their inventories. It will tighten the global traded copper market significantly and that should support the price.”
Copper experienced the first annual decline since 2008 this year, dropping 19% to $7,798 per metric ton, reports Nicholas Larkin for Bloomberg Bussinesweek. Overall, analysts are bullish on copper bets, and most expect the metal to advance during the next week. The prices soared 5% on Wednesday. [Copper ETFs Rise 5% on Fed Liquidity Action]
Global stockpiles are down in major hubs such as London, New York and Shanghai, about 23% since March. The move by China’s banks, to cut the reserve requirement ratio for banks has helped the sentiment. [Copper, Base Metals ETFs Hit in Sell-Off]
Asian buying is driving the decline in stockpiles on major exchanges. Europe accounts for about 19% of global copper demand, however, the manufacturing sector has contracted in the Eurozone, lowering demand from the continent.