The iPath Bloomberg Copper Subindex Total Return ETN (NYSEArca: JJC) has been a laggard this year compared other industrial metals exchange traded products, but some recent data could be a sign the red metal could be poised for some near-term upside.
As global economies gain momentum, industrial metals and commodity-related exchange traded funds are beginning to turn around.
Industrial metals like copper, nickel, iron and steel have all rebounded in recent months as traders bet on improving global economic conditions would bolster demand for the base metals after prices hit multi-year lows.
Related: Miner ETFs Surge on Improving Metals Prices, Economic Outlook
“Reports that Chinese steel and iron prices rose sharply in the world’s most populous nation spilled over into copper trading as traders noted domestic Chinese inventories of industrial metals has been falling. Traders are starting to embrace the notion that we may be starting to see Chinese infrastructure spending increasing, which if accurate and sustainable, could be a signal that a near-term low may be forming for many products in the industrial commodity sector,” according to Options Express.
[related_stories]More concerning in the near-term is the fact that some market observers believe the path of least resistance for copper is lower. JJC’s laggard status could morph into an all out decline as copper prices approach a critical technical juncture. While production cuts may support prices now, the bounce in the copper market may be short lived as fundamental factors remain weak.
Other industrial started rising before copper. Supporting the recent gains in base metal prices, markets saw improving data from China, the world’s largest consumer of industrial metals. However, some are beginning to doubt the sustainability of the metal market, pointing to signs of potential weakness in Chinese growth ahead.
Related: Strengthening Dollar Plaguing Copper ETN
Still, there are some important technical signs for copper.
“In addition, Tuesday’s highs also stalled near the convergence of the 20 and 200-day moving averages. Since early August we have seen prices starting to consolidate with an upper boundary forming at 2.2200 and a floor setting up at 2.0600,” adds Options Express.
For more information on the copper market, visit our copper category.
