Copper has long been the laggard in the space of base metals. But copper ended September with its best price since February 2015, ending a year and a half of weak performance.
For any investor, copper prices are definitely not for the faint of heart. The past few years saw its ups and downs, hitting the peak price of $8,823.45 in 2011 and then gradually decreasing from then on. Currently, the price is at $4,751 per ton, which is still a far cry from its peak price but a definite improvement compared to the last few months.
These recent developments are definitely worth looking at. The demand for copper is not going away, and that is a good sign for investors. But the prices have been volatile to say the least, and even if it is starting to pick up, nobody can tell how long it will stay that way.
Copper on the Rise
The journey of copper has been a tough one in recent times. Earlier in 2016, it came under pressure because people were starting to become concerned over growing stockpiles, as well as a supply that can only be described as plentiful and steady. However, it was also in June of this year that the market started seeing the prices of copper on the rise. This September, the prices rose by 5.3%.
Paul Gait, a Bernstein Research analyst, has highlighted that what’s basically happening is a copper catch-up. Copper hasn’t been performing as expected for the past months, lagging behind other metals in the same space. It looks like that’s all changing, at least for now. He goes on to say, “You’ve seen some growth expectations starting to slowly come through and slightly more positive Chinese data. Sentiment around demand growth is picking up.”
Demand for Copper
Of the different types of metals, copper is perhaps one of the most used in history. It was a very common metal that was easy to find, and because it was quite useful, it was seen as valuable. Unlike gold or silver however, copper does not have an intrinsic value. Its value lies in its utility.
You can find copper practically anywhere, so it seems like the supply for this metal stands to last the test of time. This is a good thing, because copper has always been in demand for a number of reasons and uses.
For one, copper is a good electrical conductor. This makes it a critical component in the field of electronics, and this also means that there’s a good chance every electrical wiring you see has copper in it. Aside from this, copper is very useful in telecommunications, manufacturing, construction, plumbing, appliances, the automotive industry, and many others. It is also very useful as brass, especially in making musical instruments.
The demand for copper is not likely to go down, and it will remain to be a very important player in the mining and metals sector, regardless of how its price behaves.
To Invest Or Not To Invest
There is no question as to whether or not copper is important. However, if you want to invest your money and trade in copper futures, you’ll have to do it through the New York Mercantile Exchange or the London Metal Exchange (LME). It is in LME that copper has hit its best month after a while, and this is something that’s definitely catching people’s attention.
The bigger question then is whether copper is worth investing in, and if the right time is now. There are many other factors that can affect how copper prices will eventually turn out. The good news is that even with recent events like the Brexit, which some investors may be looking at as a signal to hold their reins in, copper prices are unlikely to be affected. Analysts from the Economic Calendar have said that Brexit is unlikely “to have major long-term implications on the copper market.”
That said, there are other global forces that need to be considered. Copper demand from China will play a part, with its manufacturing sector possibly boosting sentiment for future demand. China is where you can find practically half of the world’s metals demand. Because there’s a chance of monetary policy easing, it’s very likely that this will positively affect the demand for copper.
At the end of the day, you can look at all these factors but a decision still has to be made. With any investment, it’s always a gamble and there are risks and returns that you have to live with. Only time will tell how copper prices will play out in the next couple of months, but if it is starting to catch up after hitting all time low prices, then perhaps the best time to risk it is now.