By Jim Williams
March copper managed to finish up two cents at the closing bell on Tuesday, but even that somewhat modest gain wasn’t enough to break the $2 mark.
The price continues to tread around the $2 point thanks primarily to the plunge of two things – crude oil prices and China’s economy. Oil dropped under $30 per barrel on Tuesday and the numbers out of China this week came up lower than expected. In fact, reports say year-over-year growth in China’s fourth quarter gross domestic product was 6.8 percent. That’s below predictions, and a 25-year low. Experts fully expect China’s leaders to step in to help the sagging economy with yet another stimulus.
Comments by Mark Carney, the governor of the Bank of England, apparently added fuel to the confusion over which way copper prices will go – and the economy in general. Carney told The Financial Times, “The world is weaker and UK growth has slowed.” He said that just after saying, “The year has turned and, in my view, the decision proved straightforward: now is not yet the time to raise interest rates.”
tED contributor Jesse Colombo says he has long anticipated a bear market for copper. “I wouldn’t be surprised to see a short-term, temporary bounce for several reasons,” says Colombo. “Copper is technically oversold, the smart money (commercial futures hedgers) have built up a long position, while the dumb money (large traders) have a sizable short position.”
“In the intermediate term, however, I still suspect that copper will gun for its 2009 lows around $1.25/lb,” adds Colombo. “Which is an important support level going back to the mid-1990s (see chart below). I believe that China’s bust is still in its early stages, so that continues to be a downside risk for copper,” concludes Colombo.
Hang on! The price roller coaster looks like 2016 will be a lot like 2015 – each week something different to shake the price of copper.
Be sure to check out our article next week when we take a look at the relationship between the U.S. dollar and the price of copper. We will also keep an eye on what is going on with oil, the economy in China and any further developments in England and the economy in general.
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