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.
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.
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!
The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice. CFDs are complex instruments and are associated with the high risk of losing money quickly because of the leverage effect. 68% of retail investor accounts lose money trading CFD with this provider. You should consider whether you understand how CFD work and whether you can afford to take the high risk of losing your money.7