Copper is sometimes referred to as ‘Dr Copper’, due to its ability to predict the health of the global economy. When the global economy is healthy and growing then that tends to boost demand for copper. However, when the global economy is struggling then that tends to send copper prices lower.
Slowing growth worries are starting to grow at the moment. China has had lockdowns in major cities to contain COVID-19 as it maintains its COVID-free policy. The US GDP for Q1 was released on April 28 and it showed a miss of -0.6% q/q vs 0.8% expected. If slowing growth fears grow then copper will likely find sellers in that growth negative environment.
Note that Seasonax shows that copper is entering a weaker time of year from a seasonal perspective. Over the last 15 years, copper has fallen on average -1.90%. The largest fall was -10.60% in 2010 and the largest gain was 9.09% in 2013. Will copper fall again this year?
Major trade risks
- If China promises more support to China’s economy that can boost copper prices as China is a major user of copper.
- If global growth metrics pick up then copper prices can rise on expected demand recovery.
- Also, watch out for supply/demand factors from South America as Chile and Peru are the major suppliers of Copper.
Source: FXStreet – Giles Coghlan LLB, Lth, MA – HYCM