As copper prices continue soaring upward far above the $4 per pound mark, metals analysts are searching for similar past patterns for such a rapid increase in prices for the red metal. Prices for spot copper briefly touched $4.29 on Feb. 25, according to www.kitcometals.com, are up +21% since Jan. 4, and are up +105% since their recent bottom on March 23, roughly the nadir of the COVID-induced economic downturn.
According to a post at www.tradingeconomics.com, “LME copper futures soared to above $4.30 per pound for the first time since Aug. 2011, driven by expectations of an industrial demand spark on the back of a strong economic revival in 2021 after U.S. Fed Chair Powell comments eased nerves about inflation. The commodity, considered an economic barometer, has been in a massive rally from its March 2020 multi-year lows on the back of unprecedented measures from central banks and governments to shore up economic growth.”
John Gross, publisher of The Copper Journal and veteran observer of the metals markets, does not like what he sees in the current trendline for copper because he believes price speculation may be in part fueling the rapid run-up. He also says the current pricing trend is quite similar to the increase in copper prices in the Great Recession, when after falling to a low of $1.25 in Dec. 2008, rose $3.37, or +270% to reach a record high of $4.62 two years later in Feb. 2011.
Gross also said in his Feb. 19 commentary in The Copper Journal entitled, “This is Not Good,” that although the improving economic conditions would support a move higher for copper, speculation isn’t healthy for the market. “While many are cheering the new-found wealth, in the bigger picture, we have entered a heightened level of volatility, wherein speculative trading appears to be the main driver now, thereby creating more dangerous conditions,” he wrote. “We apologize for being a party pooper, and sounding naive, but ideally, from where we sit, the market would be moving gradually higher, rather than soaring 17¢ as it did on Friday (Feb. 19). When excessive speculative trading takes over, it may well cause more damage than help the cause.”
Gross call the current rally in copper pricing a “Baby Bull” that will be one year old next month. “If it continues moving in tandem with the recovery that began in 2008, we will be looking at substantially higher prices going forward – but hopefully in a gradual formation. One that will build a stronger foundation for higher prices to build upon.”
To subscriber to The Copper Journal, contact John Gross at 631-824-6486 or [email protected].