3 Reasons Why Copper Price Has Clinched New High – is $3.4 Next?
Copper price is continuing its upward trend today. The price is up by more than 1% and is trading at $3.1748, which is the highest it has been since June 2018. Other metals like gold and silver are also rising today.
There are three main reasons why copper price is rallying amid a global pandemic. First, it is rallying because of the strong economic recovery in China, its biggest consumer. On Monday this week, data from the country showed that the economy accelerated by more than 4% in the third quarter. That was a stronger performance than the 3.2% increase in the second quarter.
A stronger Chinese economy is better for copper prices because it is associated with more demand. However, a main challenge for the metal is that the Covid-19 pandemic is continuing in Europe and America, which could tamper demand. Another challenge is that the US government has failed to pass a new stimulus, which risks slowing the recovery process.
Second, copper prices are rising because of the overall weaker dollar. As a metal traded in dollars, it has an inverse relationship with the greenback. That is because a weaker dollar makes it cheaper for foreign buyers to buy more copper.
Finally, the price is rising because of the fears that a Covid-outbreak in key source markets like Peru and Chile will lead to disruptions in supply. Fortunately, for now, the number of new cases in the two countries has been falling. In a report released three weeks ago, S&P Global said:
“A deficit in the copper market is set to deepen over the next several years as supply of the widely used metal struggles to keep up with strong demand from the power and construction sectors, compounded by the proliferation of electric vehicles.”
Copper price technical outlook
The daily chart below shows that copper price has been in a strong upward trend after reaching a low of $1.968 in March. Since then, it has almost double because of rising demand, supply constraints, and a weaker dollar. It is above the 15-day and 25-day exponential moving averages and the important resistance at $3.1165, which was the highest level in September.
Therefore, after moving above this resistance, the price is likely to rise. According to Brian Stutland of Equity Armour Investments, the next level to watch will be $3.4. On the flipside, a move below the support of $3.00 will invalidate this trend.