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HG Copper - COPPERUSDEC20
COPA:xlon - WisdomTree Copper ETC (UCITS eligible)
Copper’s impressive recovery and momentum from the March low, has started to slow with the price struggling to extend its impressive gains beyond 3.10/lb on High Grade copper (COPPERUSDEC20). The rally seen across industrial metals, not least copper, in recent months has been driven by a post-pandemic recovery in Chinese demand supported by credit and scattered supply mine disruptions.
While the fundamental outlook remains supportive, the lack of fresh upward catalysts may now pose a short-term challenge to this poster-child of momentum. Something that has helped attract a substantial amount of speculative long positions from trend following strategies that many hedge funds and CTA’s adhere to.
Copper is currently challenging the uptrend from the March low, but in our opinion the price would have to break below $2.95/lb before it kicks off a correction/consolidation phase. Just like gold’s current correction has more to do with dollar strength than changed fundamentals, an extended period of dollar strength could be the trigger that for now could pause this classic momentum trade.