Copper Jumps as Trade Tensions Ease
May 23, 2018 1:41 pmVideo
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Copper is one of the most important metals in the world. Its unique characteristics as a good conductor of heat makes it a valuable resource in the manufacture of electronics and other items.
An improving global economy leads to an increased demand for these electronics which in turn leads to its increased price. Recently, the demand has increased as people shift from internal combustion engine to electric vehicles. In electric vehicles, more copper will be needed than in the current fuel-powered cars.
As a result of this, copper prices surged from less than $2.5 a pound to a high of $3.3 in December last year. Since then, the commodity’s price has traded within a narrow range as investors remain cautious about its bull run.
Their cautiousness is warranted for two reasons. First, as the demand for copper has increased, so has the supply. Mining companies have rushed to produce more hoping to benefit from the rising demand. Second, traders have worried about the valuation of copper because of its rise making them to exit their bullish trades. Third, copper is usually quoted in dollars and recently, the dollar has strengthened. Finally, the strong dollar has brought risks to the emerging market, which is a major consumer of copper.
A pound of copper has reached $3.1, which is also its 100-day moving average as shown below. This is a price slightly higher than its support level of $2.94 which the commodity tested in April. Since July last year, the metal has traded above the 100-day moving average, which means that there is a possibility for an upward momentum in the near future.
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