In recent months, the copper market has experienced significant volatility. Prices surged from February to June due to tight supplies from copper mines and speculative trading driven by the AI boom. However, in recent weeks, prices have fallen sharply, breaking a long-standing trend line, leaving traders and hedge funds uncertain about the future.
Copper prices fell to $9,652 per ton on Friday, down 11.5% from the May high of $11,104.
Investment flows and speculative trading drove copper's rise earlier in the year, but prices are now influenced by weak economic data from China.
Hedge funds are betting on significant long-term price increases, with some predicting copper could reach $20,000 or more.
Saad Rahim, Chief Economist at Trafigura, highlighted that the recent price surge was largely speculative and not supported by physical market fundamentals. He noted that investment flows were the primary driver behind copper's rise in the first half of the year. However, Rahim pointed out that supply disruptions, like the closure of First Quantum Minerals Ltd.'s mine in Panama, will eventually tighten global supplies, despite current lackluster demand.
Copper prices on the London Metal Exchange dropped to $9,652 per ton on Friday, a decline of 11.5% from the all-time high of $11,104 in May. This price drop has been influenced by dismal economic data from China, the largest consumer of copper.
According to James McGeoch of Goldman Sachs, speculative trading and financial maneuvers have played a significant role in copper's price fluctuations. He believes that prices could range between $10,000 and $11,000 in the near term, with potential long-term targets as high as $15,000.
Hedge funds, including Rokos Capital Management and Andurand Capital Management, are betting on a significant rally in copper prices. Rokos has made substantial options purchases, anticipating prices could reach $20,000 or more in the coming years. Andurand has predicted that prices could hit $40,000, driven by a decade-long supply deficit and increasing demand due to the energy transition. Despite current market fluctuations, many analysts believe that the underlying factors will drive copper prices higher in the long run.
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The information provided in this market insight is for general informational purposes and should not be considered financial advice. It is not intended to offer any financial recommendations or endorsements. Any decisions made based on the content are the sole responsibility of the reader.
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