One of the most economically sensitive resources, investment in copper is not for the faint-hearted. With the price of the metal dipping sharply in the last three months, some tentatively anticipate a rebound in the copper market while others expect it to fall further still.
Copper – Portent Of Economic Doom Or Leading Light?
Long seen as a bellwether of economic health, in July copper suffered its worst weekly loss since the depths of the coronavirus pandemic in March 2020.
Since then, a continued growth slowdown in top metal consumer China coupled with a widespread expectation of a global recession have kept a lid on the copper index.
However, there are enough voices signalling that sentiment is still ruling sense to believe that copper is set to soar once more.
Much will depend on the market’s view of whether economic downturns will be of the commonplace variety or the massive multi-year type.
Demand for copper continues to outpace supply and stockpiles remain low.
Renewable electricity technology is copper-hungry with EVs and wind turbine components demanding much of the metal. China’s COVID-19 lockdowns are still weighing heavy on demand but a programme of loosening is anticipated.
At the end of July, China’s policy banks began the first round of investments, triggering anticipation of a speed-up of new infrastructure projects. A settlement in the Ukraine war would also trigger rapid swings in the supply and prices of commodities, including copper.
Pinpointing The Milepost Moment
What sticks out at present though is how difficult it is to pick out a turning point for copper prices.
Copper is firmly in the future-facing box in terms of commodities. It can take a decade for a new mine to become fully operational and little fresh supply has been commissioned in the past 10 years.
The bottom of the copper pot may well already have been scraped but there may well be imminent further moderate falls. That said, taking a medium rather than a short-term view on copper’s prospects is right now a prudent enough strategy.
After all, as we said at the beginning, copper is not – and never has been – for the jittery investor.