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Copper prices have surged Tuesday, reaching their highest levels in nearly six weeks, according to CNBC. In New York, copper for September delivery briefly touched $4.3065 per pound on Tuesday, the highest since mid-July, before settling at $4.2365, up 0.4% for the day. Meanwhile, three-month copper on the London Metal Exchange rose 1.3% on the day to about $9,406 per metric ton.
Investors can play this optimism with copper-based exchange-traded funds (ETFs) like United States Copper Index Fund (CPER - Free Report) , Global X Copper Miners ETF (COPX - Free Report) , Sprott Copper Miners ETF (COPP - Free Report) , iShares Copper and Metals Mining ETF (ICOP - Free Report) and Sprott Junior Copper Miners ETF (COPJ - Free Report) . These ETFs share prices have gained 3.5%, 4.9%, 2.3%, 4.1% and 3.6%, respectively, in the past month (as of Tuesday).
Is Correction in Copper Price Over?
The recent rally in copper prices has been aided by renewed investor demand, particularly from hedge funds that had cut exposure during a significant correction earlier this year. Analysts, including Ole Hansen from Saxo Bank, suggest that while the worst of the correction may be over, further recovery is linked to improved demand fundamentals and potential rate cuts by the Federal Reserve, as quoted on CNBC.
Impact of Potential U.S. Interest Rate Cuts
Federal Reserve Chairman Jerome Powell's recent remarks indicating a likely interest rate cut in September have boosted market optimism. Any rate cut would lower the strength of the U.S. dollar or greenback. Since all metals are mainly priced in the greenback, a U.S. rate cut is favorable for metal prices. In addition, lower interest rates are expected to ease financial pressures on manufacturers and construction firms, potentially benefiting copper demand.
Copper as an Economic Indicator
Copper prices are often viewed as a barometer of economic health due to its widespread use in various sectors, including electric vehicles, power grids, and renewable energy infrastructure. Analysts are optimistic about the long-term outlook for copper, citing supply risks and increasing demand for metals, which is important for energy transition.
The latest global push for renewable energy has resulted in growing demand for copper. Copper is also a key metal for cables used in data centers. Hence, the huge demand for artificial intelligence (AI) is also expected to boost copper demand (read: AI, EV Power Copper Price to New Heights: ETFs to Tap).
Strong Demand for Copper in China
Investors should note that China is the world's largest consumer of refined copper. China imported 1.61 million tons of refined copper in the first five months of the year, reflecting a year-on-year increase of 19.2% (an indication of strong consumption), per Reuters. The comparison was, however, somewhat easy due to a low base in early 2023.
Analysts at Citi said in early April that the second secular bull market of copper this century was underway — about 20 years after the first such cycle, as quoted on CNBC.
Technical Outlook
From a technical standpoint, analysts highlight resistance levels of around $4.22 per pound in New York and $9,320 per ton in London. Breaking these levels could pave the way for further gains of $4.31 per pound and $9,500 per ton, respectively, the CNBC article noted.
The ETF CPER has a relative strength index of 47.94, which is way away from the overbought territory. A reading above 70 on the RSI is generally considered overbought.
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ETFs in Focus as Copper Prices Hit Six-Week High
Copper prices have surged Tuesday, reaching their highest levels in nearly six weeks, according to CNBC. In New York, copper for September delivery briefly touched $4.3065 per pound on Tuesday, the highest since mid-July, before settling at $4.2365, up 0.4% for the day. Meanwhile, three-month copper on the London Metal Exchange rose 1.3% on the day to about $9,406 per metric ton.
Investors can play this optimism with copper-based exchange-traded funds (ETFs) like United States Copper Index Fund (CPER - Free Report) , Global X Copper Miners ETF (COPX - Free Report) , Sprott Copper Miners ETF (COPP - Free Report) , iShares Copper and Metals Mining ETF (ICOP - Free Report) and Sprott Junior Copper Miners ETF (COPJ - Free Report) . These ETFs share prices have gained 3.5%, 4.9%, 2.3%, 4.1% and 3.6%, respectively, in the past month (as of Tuesday).
Is Correction in Copper Price Over?
The recent rally in copper prices has been aided by renewed investor demand, particularly from hedge funds that had cut exposure during a significant correction earlier this year. Analysts, including Ole Hansen from Saxo Bank, suggest that while the worst of the correction may be over, further recovery is linked to improved demand fundamentals and potential rate cuts by the Federal Reserve, as quoted on CNBC.
Impact of Potential U.S. Interest Rate Cuts
Federal Reserve Chairman Jerome Powell's recent remarks indicating a likely interest rate cut in September have boosted market optimism. Any rate cut would lower the strength of the U.S. dollar or greenback. Since all metals are mainly priced in the greenback, a U.S. rate cut is favorable for metal prices. In addition, lower interest rates are expected to ease financial pressures on manufacturers and construction firms, potentially benefiting copper demand.
Copper as an Economic Indicator
Copper prices are often viewed as a barometer of economic health due to its widespread use in various sectors, including electric vehicles, power grids, and renewable energy infrastructure. Analysts are optimistic about the long-term outlook for copper, citing supply risks and increasing demand for metals, which is important for energy transition.
The latest global push for renewable energy has resulted in growing demand for copper. Copper is also a key metal for cables used in data centers. Hence, the huge demand for artificial intelligence (AI) is also expected to boost copper demand (read: AI, EV Power Copper Price to New Heights: ETFs to Tap).
Strong Demand for Copper in China
Investors should note that China is the world's largest consumer of refined copper. China imported 1.61 million tons of refined copper in the first five months of the year, reflecting a year-on-year increase of 19.2% (an indication of strong consumption), per Reuters. The comparison was, however, somewhat easy due to a low base in early 2023.
Analysts at Citi said in early April that the second secular bull market of copper this century was underway — about 20 years after the first such cycle, as quoted on CNBC.
Technical Outlook
From a technical standpoint, analysts highlight resistance levels of around $4.22 per pound in New York and $9,320 per ton in London. Breaking these levels could pave the way for further gains of $4.31 per pound and $9,500 per ton, respectively, the CNBC article noted.
The ETF CPER has a relative strength index of 47.94, which is way away from the overbought territory. A reading above 70 on the RSI is generally considered overbought.