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Copper has been regaining momentum fueled by hopes of a rebound in demand from China and weakness in U.S. dollar. The red metal rallied 8% in the initial days of 2023 after a 14% decline in 2022 and surged past $9,000 per metric ton for the first time since June 2022. In fact, copper has gained more than 20% from its low last year.
Surging copper prices will also provide a boost to miners, driving up the stock prices. Given this, investors should tap the trend with ETFs like United States Copper Index Fund (CPER - Free Report) , iPath Bloomberg Copper Subindex Total Return ETN , and Global X Copper Miners ETF (COPX - Free Report) . These have room for potential upside in the coming weeks.
China's exit from stringent zero-COVID policies has spurred bets on higher demand in the world’s top consumer, leading to a spike in copper prices. Meanwhile, markets are betting that the Fed can ease off on its interest-rate increases that have pushed the U.S. dollar against a basket of currencies to a seven-month low. A weak dollar makes dollar-denominated assets cheaper for foreign investors, potentially spurring demand for the red metal (read: Time to Bet on the Beaten-Down Copper ETFs?).
Additionally, copper is benefiting from the positive roll yield in the futures market. This is because the market is currently in a state of backwardation, where spot contracts are trading at a premium to futures. This signals that the copper market is tightening and demand is robust, paving the way for the rally in base metal. This trend is likely to persist, at least in the near term, acting as the catalyst for the commodity.
Further, copper is used in electric vehicles and renewable energy production. Emerging trends for making the world carbon-free, President Biden’s intention to boost clean energy in the United States, Europe and China’s keen efforts to spread clean energy over the long run are good for copper demand.
United States Copper Index Fund seeks to track the performance of the SummerHaven Copper Index Total Return. The index is designed to reflect the performance of the investment returns from a portfolio of copper futures contracts on the COMEX exchange. United States Copper Index Fund has accumulated $167.1 million in its asset base and charges 88 bps in annual fees. It trades in an average volume of 119,000 shares a day and has a Zacks ETF Rank #3 (Hold) with a High risk outlook.
iPath Bloomberg Copper Subindex Total Return ETN
iPath Bloomberg Copper Subindex Total Return ETN tracks the Bloomberg Copper Subindex Total Return, which seeks to deliver returns through an unleveraged investment in the futures contracts on copper. The index currently consists of one futures contract on the commodity of copper (currently the Copper High Grade futures contract traded on the COMEX). iPath Bloomberg Copper Subindex Total Return ETN charges investors 45 bps a year in fees, and has a lower level of AUM of $68 million. It trades in a lower volume of about 29,000 shares a day on average.
Investors should note that this is an Exchange Traded Note (ETN). Unlike ETFs that actually hold securities, ETNs are unsecured debts issued by a major bank (read: ETFs vs. ETNs: Why You Need to Know the Difference).
Global X Copper Miners ETF offers global access to a broad range of copper mining companies. It tracks the Solactive Global Copper Miners Total Return Index and holds 48 stocks in its basket. Canadian firms take the largest share at 28.8%, while Australia and the United States round off the next two spots. Global X Copper Miners ETF has managed $1.9 billion in its asset base while charging 65 bps in fees per year. It trades in a good volume of 485,000 shares a day on average (read: 5 Sector ETFs That Crushed the Market in Q4).
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ETFs to Buy as Copper Price Rises
Copper has been regaining momentum fueled by hopes of a rebound in demand from China and weakness in U.S. dollar. The red metal rallied 8% in the initial days of 2023 after a 14% decline in 2022 and surged past $9,000 per metric ton for the first time since June 2022. In fact, copper has gained more than 20% from its low last year.
Surging copper prices will also provide a boost to miners, driving up the stock prices. Given this, investors should tap the trend with ETFs like United States Copper Index Fund (CPER - Free Report) , iPath Bloomberg Copper Subindex Total Return ETN , and Global X Copper Miners ETF (COPX - Free Report) . These have room for potential upside in the coming weeks.
China's exit from stringent zero-COVID policies has spurred bets on higher demand in the world’s top consumer, leading to a spike in copper prices. Meanwhile, markets are betting that the Fed can ease off on its interest-rate increases that have pushed the U.S. dollar against a basket of currencies to a seven-month low. A weak dollar makes dollar-denominated assets cheaper for foreign investors, potentially spurring demand for the red metal (read: Time to Bet on the Beaten-Down Copper ETFs?).
Additionally, copper is benefiting from the positive roll yield in the futures market. This is because the market is currently in a state of backwardation, where spot contracts are trading at a premium to futures. This signals that the copper market is tightening and demand is robust, paving the way for the rally in base metal. This trend is likely to persist, at least in the near term, acting as the catalyst for the commodity.
Further, copper is used in electric vehicles and renewable energy production. Emerging trends for making the world carbon-free, President Biden’s intention to boost clean energy in the United States, Europe and China’s keen efforts to spread clean energy over the long run are good for copper demand.
United States Copper Index Fund (CPER - Free Report)
United States Copper Index Fund seeks to track the performance of the SummerHaven Copper Index Total Return. The index is designed to reflect the performance of the investment returns from a portfolio of copper futures contracts on the COMEX exchange. United States Copper Index Fund has accumulated $167.1 million in its asset base and charges 88 bps in annual fees. It trades in an average volume of 119,000 shares a day and has a Zacks ETF Rank #3 (Hold) with a High risk outlook.
iPath Bloomberg Copper Subindex Total Return ETN
iPath Bloomberg Copper Subindex Total Return ETN tracks the Bloomberg Copper Subindex Total Return, which seeks to deliver returns through an unleveraged investment in the futures contracts on copper. The index currently consists of one futures contract on the commodity of copper (currently the Copper High Grade futures contract traded on the COMEX). iPath Bloomberg Copper Subindex Total Return ETN charges investors 45 bps a year in fees, and has a lower level of AUM of $68 million. It trades in a lower volume of about 29,000 shares a day on average.
Investors should note that this is an Exchange Traded Note (ETN). Unlike ETFs that actually hold securities, ETNs are unsecured debts issued by a major bank (read: ETFs vs. ETNs: Why You Need to Know the Difference).
Global X Copper Miners ETF (COPX - Free Report)
Global X Copper Miners ETF offers global access to a broad range of copper mining companies. It tracks the Solactive Global Copper Miners Total Return Index and holds 48 stocks in its basket. Canadian firms take the largest share at 28.8%, while Australia and the United States round off the next two spots. Global X Copper Miners ETF has managed $1.9 billion in its asset base while charging 65 bps in fees per year. It trades in a good volume of 485,000 shares a day on average (read: 5 Sector ETFs That Crushed the Market in Q4).