Copper price is having a great day today. The metal’s price rose to an intraday high of $2.977, which is the highest point since April 2019. This means that the price of copper has jumped by more than 33% in the past three months. Copper is not alone. Today, silver price reached the highest point since September while gold is a few points below its highest point in seven years. Here are the three main reasons why copper is outperforming the market.
Weak US dollar
Copper is usually traded in dollars. That means that copper miners in Chile, Peru, and DRC always sell it in dollars to their global clients. As a result, the price tends to have an inverse relationship with the greenback. In recent days, the US dollar has been relatively weak against key currencies like the euro and the pound. As I wrote earlier, this could be because of the rising number of coronavirus cases in the US. If the dollar continues to weaken, it could mean that copper price will continue rising.
Global copper demand rising
There have been no specific news about copper demand in recent weeks. However, it is possible to predict when demand for the metal is rising. You can do this by simply looking at economic data from countries like China and the United States. Recent numbers have shown that the two economies are emerging from the biggest slump in decades.
For example, manufacturing PMI from China has been rising while industrial production too has been rising. The same is true with the United States and other European countries. However, the biggest risk for copper price is the rising number of coronavirus cases in the US and the tensions between the US and China.
Copper mining problems
From the supply side, copper price is reacting to the latest information from Chile and Peru. In a report by Bloomberg, mining companies in Peru are taking longer than expected to ramp up mining activity. In Chile, the biggest miner, workers are voting on whether to go on strike. Also, thousands of mining workers have fallen ill in Chile. All this has led some to assume that mining production will be disrupted this year.
Still, the surging copper price has led to a sharp increase in mining stocks. In London, Fresnillo, Rio Tinto, Anglo American, and BHP Group share prices are the best performers in the FTSE 100.
Copper price technical forecast
The daily chart shows that copper price has been on an upward trend since March. The price is also in the fourth day of straight gains. It is also above the 50-day and 100-day exponential moving averages. Also, the RSI is above the overbought level of 70, meaning that the price is getting a bit overbought.
Therefore, by hitting the important resistance at $3 and by being overbought, there is a possibility of a pullback. This could see the price retest the important support at $2.80.
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Copper price forecast
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