The iPath Series B Bloomberg Copper Subindex Total Return ETN (NYSEArca: JJC is higher by 5.43% over the past month, but some market participants have their doubts about the reliability of the red metal’s recent rally.
Some analysts are growing concerned that global troubles could drag down the industrial metal as well. Along with the trade concerns, copper prices were weakening on softening global economic data. The base metal is a significant component in many industries, including construction, and is widely seen as a barometer for global economic health.
“Doctor Copper appears to have priced in the first-stage demand shock caused by the spread of the coronavirus that causes the COVID-19 respiratory disease,” reports Reuters. “His attention has turned to China, where manufacturing activity is resuming and the supply shock of multiple mine closures during lockdowns is unfolding. Funds, though, don’t seem convinced.”
Copper Issues
With an economic slowdown in China all but inevitable as a direct result of the novel coronavirus outbreak, copper markets and related ETFs could continue to weaken on the diminished industrial demand from the largest consumer in the world.
“There has been a paring of speculative short positions on both the CME and the LME, but any sign of buy-in to the recovery narrative is conspicuous by its absence,” according to Reuters. “That may reflect fears of a COVID-19 relapse in the form of a second-wave hit to manufacturing demand, but there is also a suspicion that one particular type of investor is leaving the copper market.”
However, dueling views of the industrial metal remain in place. Some analysts are growing concerned that global troubles could drag down the industrial metal as well. Along with the trade concerns, copper prices were weakening on softening global economic data. The base metal is a significant component in many industries, including construction, and is widely seen as a barometer for global economic health.
While data confirm commercial speculators covered copper shorts as the red metal rallied off the March lows, there hasn’t corresponded moves into long positions.
“What’s surprising, though, is the lack of enthusiasm about any price upside. Outright fund long positions have failed to build in any meaningful way from last month’s four-year lows,” according to Reuters.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.
