The Dawn of a Copper Wave: Metal Hits Record Value
Copper prices are hitting unprecedented records. On Monday, 20 May, the cost of copper on the London Metal Exchange (LME) reached a record nominal high of $11,104 per metric ton. Moreover, as analysts predict, the metal price are anticipated to double.
The main reasons behind copper’s ATH in May
There are several reasons why copper prices are confidently increasing. First of all, the rate cut is on the horizon—given the positive statistics from the United States, this will happen very soon. There are a lot of dollars in the world now, and there will be even more when the Fed starts cutting the rate. This phenomenon reduces the currency's value, making everything look more expensive against its background.
Lower rates economically mean that commodities prices are growing because of cheaper money. By lowering rates, the Federal Reserve will clearly indicate that the global economy is beginning to recover, which implies that people feel better about their financial situation and can afford to buy more goods, including copper.
It is also important to note that the demand for copper is increasing, as this metal is an integral part of the electrification processes. Transition to a green economy also pushes copper prices: the red metal is a necessary material for the construction of capacities, batteries, wind turbines, etc. Thus, the expansion of electric vehicles and renewable energy technologies continues to drive up the need for copper.
Economic surge fuels rise in copper prices
The leading copper importers, China and the European Union, will buy more copper, boosting prices. These regions have some problems in the economy, and one of the answers to how to solve them is the transition to renewable energy, where copper is preeminent.
Continuing the thought about possible rate reduction, copper prices will increase even more when a rate cut happens. Today, we are at the beginning of an economic cycle, not the end—the reduction in rates means that economic growth is anticipated. When we enter the phase of economic development, everything needed for it, for example, commodities, becomes more expensive.
What are the copper investment possibilities in 2024?
The upward trend of copper prices may attract some investors. Usually, there are three ways to invest: exchange-traded funds (ETFs), futures, and shares of production companies. The choice of a specific format depends on which market you have access to. It also varies depending on how much money you have, your planning horizon, and whether you are a qualified investor.
Investing in copper manufacturers might be challenging, though the share prices of mining firms typically correlate with metal prices. For example, there is BHP Group, one of the world's leading mining companies, which derives approximately 30% of its revenue from copper sales as of 2023. Nevertheless, this type of investment requires a keen understanding of market dynamics that can influence prices.
As for futures, besides LME, an important venue for trading copper futures is the Chicago Mercantile Exchange (CME), which offers a robust market for copper futures. For investors looking to gain exposure to copper without directly investing in mining companies or futures, ETFs provide a convenient alternative.
The Global X Copper Miners UCITS ETF (COPX) seeks to track the Solactive Global Copper Miners Index, which includes companies worldwide engaged in the exploration, mining, and refining of copper. Another option is the WisdomTree Copper, which follows the Bloomberg Copper Index.
The main reasons behind copper’s ATH in May
There are several reasons why copper prices are confidently increasing. First of all, the rate cut is on the horizon—given the positive statistics from the United States, this will happen very soon. There are a lot of dollars in the world now, and there will be even more when the Fed starts cutting the rate. This phenomenon reduces the currency's value, making everything look more expensive against its background.
Lower rates economically mean that commodities prices are growing because of cheaper money. By lowering rates, the Federal Reserve will clearly indicate that the global economy is beginning to recover, which implies that people feel better about their financial situation and can afford to buy more goods, including copper.
It is also important to note that the demand for copper is increasing, as this metal is an integral part of the electrification processes. Transition to a green economy also pushes copper prices: the red metal is a necessary material for the construction of capacities, batteries, wind turbines, etc. Thus, the expansion of electric vehicles and renewable energy technologies continues to drive up the need for copper.
Economic surge fuels rise in copper prices
The leading copper importers, China and the European Union, will buy more copper, boosting prices. These regions have some problems in the economy, and one of the answers to how to solve them is the transition to renewable energy, where copper is preeminent.
Continuing the thought about possible rate reduction, copper prices will increase even more when a rate cut happens. Today, we are at the beginning of an economic cycle, not the end—the reduction in rates means that economic growth is anticipated. When we enter the phase of economic development, everything needed for it, for example, commodities, becomes more expensive.
What are the copper investment possibilities in 2024?
The upward trend of copper prices may attract some investors. Usually, there are three ways to invest: exchange-traded funds (ETFs), futures, and shares of production companies. The choice of a specific format depends on which market you have access to. It also varies depending on how much money you have, your planning horizon, and whether you are a qualified investor.
Investing in copper manufacturers might be challenging, though the share prices of mining firms typically correlate with metal prices. For example, there is BHP Group, one of the world's leading mining companies, which derives approximately 30% of its revenue from copper sales as of 2023. Nevertheless, this type of investment requires a keen understanding of market dynamics that can influence prices.
As for futures, besides LME, an important venue for trading copper futures is the Chicago Mercantile Exchange (CME), which offers a robust market for copper futures. For investors looking to gain exposure to copper without directly investing in mining companies or futures, ETFs provide a convenient alternative.
The Global X Copper Miners UCITS ETF (COPX) seeks to track the Solactive Global Copper Miners Index, which includes companies worldwide engaged in the exploration, mining, and refining of copper. Another option is the WisdomTree Copper, which follows the Bloomberg Copper Index.
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