For much of this year, copper has been one of the best-performing commodities as highlighted by a year-to-date gain of almost 17% for the iPath Bloomberg Copper Subindex Total Return ETN (NYSEArca: JJC).
However, some commodities market observers are concerned the red metal is starting to cool off. The could be right. Over the past week, JJC is lower by about 3% and the popular copper exchange traded note recently slipped below its 20-day moving average.
“In fact, copper just logged two straight weeks of declines; prior to that, the metal often seen as a rough gauge of global economic growth notched eight straight weeks of gains,” reports CNBC. “Investors ought to keep an eye on Chinese economic growth, Streible said. China is one of the world’s largest consumers of the industrial metal, and its prices can be vulnerable to economic reports out of the country.”
Similar to index-based exchange traded funds, ETNs also track some sort of index as part of their investment strategy. However, an exchange traded note, like the name implies, is a type of debt note that trades on an exchange. Additionally, the underwriting bank that issues ETN shares may choose to stop share creations.
Related: The Red-Hot Red Metal With More Upside
A near-term issue for copper is the ability of the Trump Administration to get its ambitious infrastructure efforts off the ground, something many market observers believe will not happen until next year. Additionally, if that effort does not approach the $1 trillion in expenditures promised by the president on the campaign trail, markets could be disappointed.
“Short dollar, long metals, long gold, and long rates have been persistent trends in 2017, but all suffered a violent reversal at the same time around September 8th. CFTC data reveals that speculator positioning in copper, gold, Euro, and Canadian dollar FX futures was stretched,” Pravit Chintawongvanich of Macro Risk Advisors wrote in a note, according to CNBC.
JJC has seen third-quarter inflows of $3 million.
For more information on Copper ETFs, visit our Copper category.