Copper price rally is far from over. That is according to analysts at Eurasia Group, one of the biggest consulting firms in the world. The price of copper is now trading at $2.6430, which is slightly below yesterday’s high of $2.6720.
Copper demand set to rise
Copper price is set to roar back after years of being a laggard. According to Henning Gloystein, demand of the metal, coupled with supply shortfall could lead to a significant rally. On demand, he pointed the various government investments that are meant to stir growth. He argues that these investments items like electric vehicles, 5G, and renewable power will lead to a sharp increase in copper demand.
Still, he believes that demand will fall by about 5% this year and then start rising in 2021 as these investments rise. He said:
“Huge green and digital stimulus programs, especially in Asia and Europe, will create the conditions for a boom in copper demand — electric vehicles, 5G networks, and renewable power generation all require large amounts of the red metal.”
Eurasia Group is not the only big firm to raise its copper price target. In a report earlier this month, analysts at Bank of America said that the price would jump by 5.6% a ton this year. They expect the price to shoot to $6,250 in 2021. Similarly, those at Morgan Stanley have raised their target for the metal.
Another factor that could push copper price higher is the spreading coronavirus illness. With the disease spreading in countries like Peru and Brazil, supply could be affected this year.
Further, the fact that the likelihood of a V-shaped recovery are rising as evidenced by the latest manufacturing and services PMI numbers. For starters, Dr. Copper is usually viewed as a barometer of the world economy. Other metals like silver and gold are on an upward trend.
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Copper price technical outlook
On the daily chart, copper price is trading at $2.6440. On the daily chart, the price is above the 50-day and 100-day exponential moving averages. It is also slightly below the 78.6% Fibonacci retracement it tested on June 9. Still, the price is on an upward trend as evidenced by the ascending pink trendline. This means that the price may continue to go up as bulls target the $2.700 support.
On the flip side, a move below $2.5275 will invalidate this trend. This price is along the 68.2% retracement and along the lowest level on June 16. That decline will likely happen if the risks of a second wave of the virus rise.
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