25.05.2023 – About a month ago, we were still talking about the directionless trend in copper. Now it seems that things are moving: The price of the red metal has slid south and formed a downward trend. We take a look at the background.
The situation for copper has changed drastically in recent weeks, here the daily chart. The support in the sideways trend was convincingly broken at the beginning of May, now we see a rather clear bearish movement.
Source: Bernstein Bank GmbH
The Shanghai Metals Market online portal blamed the weaker-than-hoped recovery of the Asian economy for the price decline. It also said that supply is increasing and the strong dollar is slowing demand. In Europe, the situation was hardly different recently: Metal Bulletin reported all industrial metals were under pressure on the London Metal Exchange due to concerns about the national economy.
Analysts, meanwhile, are divided on the way forward. Goldman Sachs was recently bearish, while Bank of America was quite bullish.
Recession fears
Goldmen just lowered their average price target for this year from $9,750 to $8,698 per ton. Metal prices reflected the global recession, they said.
Analysts referred to the eurozone manufacturing price index, among others. The May PMI came in at 44.6 points, while most analysts had expected 46 points. Demand in the industrial sector is currently shrinking at the fastest pace since the closure of factories in the wake of Corona three years ago. In addition, the Markit Flash PMI in the U.S. slipped to 48.5 in May, which also signals contraction and was the lowest level in three months.
Hopes for China
Bank of America, on the other hand, sees things quite differently. It expects the price of copper to reach $10,000 per ton by the end of the year. This is mainly due to China – the People’s Republic is renewing its network of power lines.
Our conclusion: The recession issue will determine the further course of the copper price. Conversely, the red metal is also a leading indicator for global economic activity and thus also for the stock market. We are curious to see what will happen next – Bernstein Bank wishes successful trades and investments!
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