A confluence of factors could be brewing that may work in favor for bullish copper prices. Short- or long-term investors may want to get ahead of the move given the drop in copper prices the past year.
One of the key drivers for bullishness will stem from demand in China. With the second largest economy looking to revitalize its economy after a real estate development crisis, copper demand has been tempered. However, recent government stimulus measures could help resuscitate its ailing economy and thus, its demand for the metal.
A strengthening yuan could potentially be a harbinger for future upside. Pair that with a strong Chinese stock market, and the double confirmation could signal bullishness is ahead.
“The yuan shows signs of stabilizing following big stock market gains in China as Beijing intensifies efforts to stem the rout,” said Ole Hansen, head of commodity strategy at Saxo Bank.
Increased Chinese demand will also be met by supply constraints caused by the halting of key global producers. That said, basic economic principles guiding supply and demand should further prop up copper prices.
“The supply cuts reinforce our view that the copper market is entering a period of much clearer tightening,” wrote Goldman’s analysts. They are forecasting copper prices could reach $10,000 per ton in 2024 and beyond.
2 Ways to Play Copper Bullishness
Rising copper could have a spillover effect into mining, which should help the Sprott Junior Copper Miners ETF (COPJ). The fund seeks to provide investment results that track the total return performance of the Nasdaq Sprott Junior Copper Miners Index. The index incorporates mid-, small-, and micro-cap companies entrenched in copper-mining-related businesses.
Additionally, the tangible transition to alternative energy sources will benefit the metal’s prices.
“Rising demand driven by the green energy transition and a likely decline in the U.S. dollar in the second half of 2024 will push copper prices higher,” said a report by BMI, a Fitch Solutions research unit.
As mentioned, part of copper’s appeal is its inclusion as part of critical minerals that will be necessary in the global shift to alternative energy sources. That said, to get broader exposure to critical minerals, investors can consider the Sprott Energy Transition Materials ETF (SETM). It seeks to provide results that correspond to the total return performance of the Nasdaq Sprott Energy Transition Materials Index. It tracks the performance of a selection of global securities in the energy transition materials industry.
Demand for overall critical minerals is projected to rise. That’s because more countries are looking to meet their carbon emissions reduction goals. In turn, the demand for miners that materially affect the extraction of supply will also increase. SETM provides investors access to the miners who produce uranium, lithium, copper, nickel, silver, manganese, cobalt, graphite, and also rare earth elements.
For more news, information, and analysis, visit the Gold/Silver/Critical Materials Channel.