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Copper Report: Dollars and Sense

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Copper Report: Dollars and Sense

Copper prices rose on Monday, fueled by a weaker dollar and wage talks at the world’s largest copper mine.

The red metal opened this morning at $3.15 a pound. Click on the image for up-to-the-minute pricing.

The red metal received some support as a six-week rally in the dollar appeared to stall. A stronger dollar makes metals more expensive for buyers with other currencies.

Let’s Talk Dollars – As In Annual Salary

The union at BHP’s Escondida mine in Chile said on Friday that it has started negotiations with a proposal that includes a bonus of about $34,000 per worker.

This announcement brings back memories of failed talks last year, which led to a 44-day strike and pushed copper prices higher.

“The risk of an impasse is very high,” ETF Securities analyst Nitesh Shah told Reuters.

Any interruption at Escondida would come on top of the closure of India’s second-largest smelter after environmental protests.

As a result, “Copper is likely to continue to trade higher,” Shah added.

More Mining News

China’s Chinalco announced it has started a $1.3 billion expansion of its Toromocho mine in Peru. The expansion will reportedly raise copper output at the mine by 45 percent by 2020. China’s official Xinhua news agency said Chinalco aimed to bring annual refined copper output to 300,000 tons.

Copper has been hovering near the psychologically important $7,000 per ton mark since hitting a four-year high in December, trading anywhere between $6,800 and $7,300.

“Even though the price of copper has not moved much over recent weeks and it is difficult to discern any clues about a future trend in the price action of the nonferrous metal, the bullish trading pattern dating back almost two and a half years remain intact,” states Andrew Hecht of Seeking Alpha. “Copper has been in a sleepy range, and the trend dating back to early 2016 suggests that it will eventually challenge the upside. However, trades issues and Italian debt could combine to create a risk-off environment that puts copper’s bull market trend in jeopardy,” concludes Hecht.

Could Copper Trade at $10/Pound?

You read that right. The topic of $10 a pound for copper was brought up recently by Leigh Goehring of research firm Goehring & Rozencwajg. In an interview with Investing News Network at the recent Mines and Money conference in New York, Goehring went out on a limb to suggest his bullish forecast isn’t too far of a stretch.

“We basically went from a bottom of about $0.60 reached in 2000 to a top of about $4.10 reached in the beginning part of 2006. So, in a five-year period, you basically went up four or five and a half times the price,” said Goehring.

“I wouldn’t be surprised if something along that magnitude happens in this bull market. We started to hit the bottom a little below $2 back in the first quarter of 2016, so … a target price would be anywhere between $7 to $10 in this cycle,” Goehring added.

You can hear the entire interview here.

Further Reading

Copper Rises as Traders Watch Labor NegotiationsThe Wall Street Journal

Copper Market Can Withstand Trade Wars Because Of Growing Supply Issues – Kitco

 

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Jim Williams

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