Copper prices and related exchange traded products have held up despite the falloff in crude oil prices, but some are growing concerned that global troubles could drag down the industrial metal as well.
Over the past three months, the iPath Bloomberg Copper Subindex Total Return ETN (NYSEArca: JJCTF) rose 7.2%, United States Copper Index Fund (NYSEARCA: CPER) gained 5.8% and iPath Bloomberg Copper Subindex Total Return ETN (NYSEArca: JJCB) increased 6.1%.
Copper for November delivery added more than 3% this month, compared to the 12% drop off in Brent crude. The disparity between the two commodities is notable as many traders cover the two in the same basket of broad commodities, with a larger portion tilted toward energy.
Many also look to the base metal as Dr. Copper or a gauge for the global economy since the metal is a major component in many various industries.
The recent gains in copper has been a stark contrast to the 20% drop off over summer when fears of global trade wars between the U.S. and China heated up, the Wall Street Journal reports. China makes up almost half of all global demand for copper.
Michael Widmer, a commodities strategist at Bank of America Merrill Lynch, argued that the summer pullback was overdone, which has left copper in a more stabilized position when compared to other commodities.
“Copper has already priced in an awful lot and demand is not necessarily bad,” Widmer told the WSJ.
Furthermore, copper traders have taken a more optimistic outlook on hopes of thawing relations between the U.S. and China as talks between top officials resumed ahead of a meeting between leaders later this month. Swing traders may be affecting current prices in the copper market.
However, more mid-term outlook may not be so rosy. The Federal Reserve could shift toward a tighter monetary policy and dampen U.S. growth. China’s bank lending and consumer spending slowed in October. Germany’s economy contracted for the first time in three-and-a-half years over the third quarter. Japan’s economy also shrnak at an annualized 1.2% rate.
“2019 may not be the strongest year for commodities,” Widmer warned.
For more information on the copper market, visit our copper category.