Analysis of the copper price on the stock exchange

Oil and gold are not the only commodities that can be invested in today. Copper is another metal that can be traded using CFDs. In this article, we will look at how the copper price and market works, what its historical development has been and how you can carry out your own analysis of this stock.  

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Analysis of the copper price on the stock exchange

Elements that can influence the price of this asset:

Analysis N°1

In particular, it will be important to monitor the economic health of copper-importing countries, including China and the United States. The better the economies of these countries, the greater the demand for copper.

Analysis N°2

Of course, it will also be necessary to keep an eye on the foreign exchange market to monitor the value of the US dollar. Indeed, given that copper is quoted in this currency, a weak dollar will make it more interesting to buy and vice versa for a strong dollar.

Analysis N°3

Developments in the new technology sector will also be among the elements to be closely monitored when studying the price of copper.

Analysis N°4

Finally, geopolitical or exchange rate events concerning copper exporting countries may also have an impact.

 

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Some basic notions about copper as a raw material:

It is not for nothing that copper is one of the most interesting assets for investors today. This is because the commodity is used in many industries and is in high demand in the industrialised countries.

If we all know the main properties of copper, it is important to understand that this raw material is one of the most sought-after in the world, as its uses are so varied.

However, copper production is still limited to only a few countries in the world. The largest producer of copper today is Chile, which produces almost 37% of the world's copper.

Today, there are also more than 75 sub-categories of copper used in various fields. But its main use is in heavy industry and the production of electronic and technological components. This makes it one of the most sought-after metals on the market.

Finally, although copper is a metal, it is not a precious metal like gold.

 

On which markets and how is the price of copper quoted?

Copper investments on the LME or London Metal Exchange. On this market it is possible to trade options and derivatives on this commodity.

But it is also possible to trade copper using these trading instruments from the NYMEX or New York Mercantile Exchange and the SFE or Shanghai Futures Exchange which are located in the US and China.

The base price for copper is set by the LME in London. This market is of course not only for copper, but also for other commodities. But as we have just seen, China and the United States also trade a large amount of the world's copper. This information is important because these two countries and their economies can have a strong influence on global copper demand.

 

How has the price of copper evolved historically?

The price of copper has experienced many stock market movements over the past ten years.

First, it followed a significant bullish phase between 2003 and 2006 with a record high of over $8,800 per tonne. It then fluctuated between $7,000 and $8,000 until 2012, when a new downward phase began until reaching a low of $4,375 in 2016.

This will be followed by a rebound that will allow copper to regain points up to the $7,261.5 level in 2018 but will be immediately followed by a correction to $4,615 in 2020, in the middle of the Covid pandemic.

Since then, there has been significant volatility in the copper market. The last historical high for this commodity was $10,729 in March 2022.

 

How does copper supply and demand work?

As you know, the price of copper, like any other stock market security, is directly influenced by supply and demand.

On the supply side, the largest copper reserves are found mainly in South America. Peru and Chile alone produce more than a third of the world's copper each year. It is therefore well known that the economic health of these two countries and the value of their respective currencies can influence the evolution of the copper price. A significant change in the value of these currencies can affect the price of copper very quickly.

Chile, currently and undoubtedly the largest copper producer in the world, has reached its maximum annual productivity limit. As a result, importing countries are currently looking for additional suppliers. The companies involved in copper mining are looking for larger deposits.

The reason why importing countries and operators are looking for new copper deposits is that demand is growing. Most of this demand comes from the United States and China, where the technology and communications industries are very active and consume a lot of copper. Copper is an excellent conductor for cabling networks and is used in the manufacture of electronic parts.

Frequently Asked Questions

How to perform a technical analysis of copper on the stock market?

Technical analysis is used to analyse the price of copper on the stock market from stock market charts. This is based on the use of technical indicators of trend and volatility to try to obtain bullish or bearish signals. These indicators can be the RSI indicator, the MACD, stochastics, moving averages or strategic turning points such as pivots or supports and resistances.

Where and how to invest in copper?

If you want to invest in the price of copper, there are a number of ways to do so. The first is to use derivatives such as CFDs, or contracts for difference, which allow you to take a position on the rise or fall of the price. The second is to invest in the share prices of companies that are involved in the sector, particularly in the production of copper for the global industry.

Can we know the future of copper?

It is not possible to know precisely the future of copper and its future movements on the stock market because the stock market is a volatile and unpredictable market. But you can use fundamental analysis and technical analysis to best assess the possible price movements of this commodity based on indicators, even if these signals are not 100% reliable.

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