After starting the year as a laggard among commodities exchange traded products, the iPath Bloomberg Copper Subindex Total Return ETN (NYSEArca: JJC) has reversed that scenario in significant fashion, surging nearly 20% over the past month.
Copper prices are benefiting as investors anticipate greater demand out of China and increased infrastructure projects under president-elect Donald Trump. Some professional traders are reacting by increasing bullish bets on the red metal.
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.
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While China is often seen as the dominant force behind copper’s price action, Trump’s pledge to bolster U.S. infrastructure is seen as the catalyst for the red metal’s post-election surge.
“According to the CFTC’s weekly Commitment of Traders data up to November 29 so-called managed money investors have taken net longs to a fresh recored high of just under 81,000 lots,” reports Frik Els for Mining.com. “That’s the equivalent of just over 2 billion pounds and shatters the previous peaks achieved mid-2014 when the copper price was above $3.20 a pound.”
Professional speculators have recently been reducing long exposure to gold, silver and platinum, but have consistently boosted long wagers on copper over the past several weeks.
Other industrial metals 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.
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“After vastly underperforming other metals and steelmaking raw materials in 2016, copper is looking much healthier than pre-Trump with a 34% rise from six-year lows hit in January this year,” adds Mining.com. “Better prospects for the bellwether metal is nowhere more evident than on derivatives markets and the shift in positioning of large-scale derivatives speculators such as hedge funds.”
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