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Copper Update: Supply and Demand, Trade Talks and the Fed

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Copper Update: Supply and Demand, Trade Talks and the Fed

If anyone ever told you following copper was boring, you may not want to trust anything they have to say. OK, that may be stretching things a little, but the red metal is not only interesting to track from an industry perspective, it is mesmerizing how predictable copper is for the global economy.

This week, copper is looking to make a comeback after finishing down a tick last week. Investors remain cautious about the overall economy and the demand for copper, despite a forecast for a surplus of the red metal in 2020.

According to the International Copper Study Group (ICSG), the copper market should see a surplus of 281,000 tons in 2020. That is quite a swing from this year’s deficit of 320,000 tons. If you remember, last week we told you the ICSG reported the copper market was in a 220,000-ton deficit in the first six months of 2019 compared with the previous year.

The ebb and flow of supply falls right in line with the ongoing trend of copper prices.

Since early September the price of copper has traded in a range from $2.5150 to $2.7065 per pound. At $2.6770 at the end of last week, the price of the red metal has been trending higher and was closing in on the top end of its trading range.

“Copper has been trading sideways but has moved higher over the past two months,” states Andrew Hecht of Seeking Alpha. “Technical metrics indicate that the copper market could be preparing to break to the upside. While there were conflicting signals from both sides, any progress on trade would be a welcome sign for the Chinese economy. Copper would be a beneficiary of a thaw in the trade war, and an eventual deal could ignite the price of the base metal and other industrial commodities on the upside.”

Copper opened this morning at $2.67 a pound. Click on the chart below for up-to-the-minute pricing.

All Eyes on the Fed

While trade talks continue and Brexit drags on, the Federal Open Market Committee of the U.S. Federal Reserve quietly sneaks up and has its latest meeting this week. There are two schools of thought leading into the meeting – either the Fed will leave the rate unchanged, or, it will reduce the short-term Fed Funds rate by 25 basis points. If they do reduce the rate, it will be the third time this year.

The above-mentioned Andrew Hecht of Seeking Alpha published an in-depth look at this week’s meeting. You can read his Hold Your Breath for This Fed Meeting – Trick or Treat article here.

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Jim Williams

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