Copper price outlook as opposing factors drive the market

By: Faith Maina
Faith Maina
Faith strives to break down complex developments so investors can make better informed decisions. When Faith is not immersed… read more.
on Nov 24, 2021
  • Copper price has largely been within a horizontal channel for about 9 months.
  • There have been bullish and bearish forces at play during this timeframe.
  • The trend may continue in the short term.

Copper price has been trading within a horizontal channel since mid-February. With the opposing factors, it may remain within the formation in the short term.

China’s economy

After hitting a five-month high of $4.82 per pound in mid-October, copper price has since dropped by about 8.16% to the current $4.42. The decline is largely as a result of China’s slowed economic growth. The Middle Kingdom is the leading consumer of copper and other industrial metals. As such, the pace of its economic growth often impacts the red metal’s demand and prices.  

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To begin with, China has continued to battle with the Delta coronavirus variant despite the enacted stringent measures. Notably, the combat has proved expensive for its people and the economy at large. The energy crunch and hitches in its property market have further slowed its economic recovery.

In mid-November, the International Monetary Fund (IMF) noted that China’s economy is slowing. In the press release, the organization stated, “China’s recovery is well advanced, but is unbalanced and momentum is slowing, even as downside risks are accumulating.”

Some of the highlighted short-term risks include the heightened financial vulnerabilities, reduced consumption, and ongoing uncertainties regarding the coronavirus pandemic. On a long-term basis, IMF has probable headwinds like the further decline in productivity growth and a dwindling labor force.

Chile elections

Investors in the copper market have been watching the Chilean presidential elections closely; an aspect that has contributed to the range-bound trading. The South-American country is the leading producer of copper in the world. If Gabriel Boric, the left-wing presidential aspirant enter into power, he will likely increase the mining royalties and export duties. Such a move would result in higher production costs thus increasing copper price.

In the first round of elections, which was conducted on 21st November, the right-wing presidential candidate, Jose Antonio was leading. The focus is now on the run-off in the coming month.

Copper price outlook

In coming months, copper price will likely get a boost from the green economy and infrastructure developments across the globe. However, as central banks increase interest rates to deal with the rising inflation, there may be a decline in demand from the construction sector.

As the opposing factors impact copper price both in the short and long term, the range between the psychological level of $4.00 and $4.82 will remain a crucial one for the red metal. Notably, it has largely been trading within this horizontal channel since mid-February.

copper price
copper price
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