Copper Just Notched Its Biggest Month in 5 Years

Amid a global vaccine rollout and a renewed risk-on sentiment, copper prices are ticking higher. The metal just posted a huge month, helping the Global X Copper Miners ETF (COPX) climb to a 25% year-to-date gain.

A MarketWatch report noted that copper notched its highest monthly gain on Friday, February 26 in four years. Traders are hoping that the vaccine rollout can spur demand for copper around the globe.

“Copper prices have increased due to actual and anticipated demand, stemming from expectations of a strong post-coronavirus recovery, as well as concerns regarding supply shortages and a weakening U.S. dollar,” said Jeff Klearman, portfolio manager at exchange traded fund issuer GraniteShares.

COPX seeks to provide investment results that correspond generally to the price and yield performance of the Solactive Global Copper Miners Total Return Index, which is designed to measure broad-based equity market performance of global companies involved in the copper mining industry.

COPX gives investors:

  • Targeted Exposure: COPX is a targeted play on copper mining.
  • ETF Efficiency: In a single trade, COPX delivers efficient access to a basket of companies involved in the mining of copper.

COPX Chart

Chinese Demand Fueling Copper’s Rally

One of the major tailwinds behind the copper rally is China’s demand for the metal. According to the MarketWatch article, China’s copper use intensified to the point that the country now consumes over half the world’s copper.

“Chinese demand has significantly increased, with the nation accounting for 55% of the world’s copper consumption” the article said. “At the same time, however, London Metal Exchange inventory levels have fallen to 15-year lows and production in top producer Peru has fallen, creating a forecasted large copper ‘deficit’ this year and perhaps over the next few years.”

In a report released on Feb. 22, the International Copper Study Group said that the preliminary world refined copper balance in the first 11 months of last year indicated an apparent deficit of about 590,000 metric tons for 2020, with the group citing strong Chinese apparent usage,” the report added.

Momentum is squarely on copper’s side when looking at the Bloomberg Copper Subindex’s one-year chart. The relative strength index (RSI) shows a reading of 66.46, which is just below overbought levels.

The uptrend has been a steady climb since the 50-day moving average crossed up the 200-day moving average on July 17, 2020. The index is up 60% within the past year.

^BCUS Chart

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