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Copper: The Yo-Yo Effect

By Jim Williams

Five months into 2017 and we still can’t determine where the price of copper is going. The red metal hit a three-week high on Monday thanks to another possible copper mine strike. Then yesterday, copper takes a dent in the armor after not so pleasant news out of China. Investors expect the constant yo-yo effect with copper pricing, but the first couple of days this week is the epitome of having a vested interest in where copper is going.

More labor worries push copper higher
Copper prices surged yesterday on news of another possible union standoff. The latest dispute comes from Freeport McMoRan’s Grasberg mine in Indonesia where union leaders are threatening to walk out for the entire month of May after Freeport laid off 10% of its Grasberg workers after a contract dispute with the Indonesian government (see Trolling Twitter below to read more about the impact copper mines will have on the future price of the red metal).

China Slows Copper Roll
Just as fast as the labor news pushed copper prices higher, new economic reports out of China pushed prices down again. New data from a private survey released yesterday shows China’s factory sector lost momentum in April. Actually, the numbers show China’s manufacturing sector grew last month, but just barely. April was China’s weakest growth pace in seven months, as domestic and export demand faltered and commodity prices fell.

“Though copper has lost some of the momentum it had at the end of last year, the uptrend is still intact,” says tED contributor Jesse Colombo of Forbes. “Copper is currently trading in a range between its $2.50/pound support level and $2.80/pound. Copper’s next major challenge is to break above the $3/pound resistance level. From this perspective, copper’s technicals are neutral as it treads water between its former downtrend line and $3/pound resistance level.”

Trolling Twitter
We took a twirl on Twitter to find some copper tidbits. Here is a nugget on copper:

Rick Rule, President and CEO of Sprott U.S. Holdings Inc. talks copper and copper production in part of a one-on-one interview.

“We believe the incentive price for new copper mine construction on a global basis is about $3.50 US. Once that incentive price is achieved then you begin the mine building process… If one assumes it takes two or three years to get to $3.50 and that takes five or six years for that $3.50 number to generate some supply response, we have the opportunity between now and the time the supply response hits which is eight to 10 years from now to see the price spike to $4.50 or $5.”

For the complete interview, click here to visit with The Next Bull Market Move.

Copper Trends
Investors predict copper prices may tread water this week as the Federal Reserve wraps up its meeting monthly meeting today. Another key factor across all global markets is the upcoming, and somewhat volatile, presidential election in France. The Fed is a recurring factor to the red metal. Politics in France, could shake the markets to the core – similar to the Brexit vote and the U.S. Presidential election this past November.

We will keep an eye on the FOMC meeting notes and Sunday’s election and report any copper related news here next week.

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