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Copper Continues to Keep Us Guessing

Copper Continues to Keep Us Guessing

This time last week, copper was plummeting to its lowest level in nearly three years, touching under $2.47 a pound. The red metal suddenly became red hot towards the end of last week on news from Beijing that the U.S. and China are continuing to negotiate in the ongoing trade war. That glimmer of hope pushed copper above $2.60 a pound.

Investors woke up this morning seeing copper at $2.63 a pound. Click on the chart below for up-to-the-minute pricing.

The strength in the dollar index, the ongoing trade war between the U.S. and China, and weakening economic data in the US have weighed on the price of the nonferrous metal as it made a lower low at the start of last week.

“I continue to believe that a trade deal between the U.S. and China is in the best interests of both nations and the world,” states Andrew Hecht of Seeking Alpha. “Any agreement or even serious negotiations would likely inject some degree of optimism back into the market and lift the price of copper. Therefore, I would be a scale-down buyer of the copper producer, but I will leave plenty of room to add to long positions on further price weakness.”

Copper’s Delicate Balance

For a few weeks, copper has been treading water near $2.50 a pound. As mentioned above, last week saw copper drop to its lowest point since 2016 and then quickly recover to $2.60 and above. So, what’s next for the industrial metal?

Andy Home of Reuters takes a deeper dive into where he thinks the red metal is heading in his article, Copper: Finely poised between negative macro and robust micro.

Warehouse Stocks on the Rise

Copper has been piling up in warehouses in both London and here in the states. Typically, higher inventories mean lower prices, but that trend isn’t happening this week.

Copper stocks on the London Metals Exchange have increased from under 120,000 tons in mid-March to 318,675 metric tons as of Sept. 5.

Source: Kitco/LME

On COMEX, copper in registered warehouses has risen from under 35,000 tons in early July to 44,113 metric tons on September 5.

Source: Kitco/COMEX

We will keep an eye on inventory levels over the next week and see if the increasing stockpile of the red metal will play a significant role in the near-term price of copper.

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Jim Williams

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