Copper futures price could see V-shaped recovery become ‘supercharged’

Copper has long been used as a yard stick to measure world economic growth, but even though the metal is expected to see a ‘supercharged’ recovery in the latter half of 2020 many analysts remain sceptical over the long-term.

The price of copper has long been used as a yard stick for measuring world economic growth, with rising prices viewed as a strong indicator that a significant increase in global manufacturing and construction will follow.

But while many market commentators believe that the metal will see a ‘supercharged’ recovery in the latter half of 2020, many analysts remain sceptical that the rally could be short-lived.

Citi analysts fear copper is overvalued in third quarter

The copper rally over the past month from $5700 a ton to over $6,000 a ton has occurred against a backdrop of flat to falling equity prices and bond yields, leaving copper looking overvalued by $220 to $420 per ton based on historical relationships, according to Citi analysts in a note earlier this month.

‘Overall, we stick with our very near-term point price target of $5,750 a ton (versus spot of $6,050 a ton) though we see a window for a pullback as the 2 to 4 weeks, and ultimately we recommend buying on dips.’

Saxo Bank give bearish outlook for the red metal

Meanwhile, analysts from Saxo Bank offered a particularly dim outlook for copper prices, contending that investors were far too willing to believe that the global economy will return to normal in the latter half of the year despite lockdown restrictions easing.

‘Copper’s recent recovery to pre-pandemic levels will challenge the metal’s ability to reach higher ground in the third quarter,’ Ole Hansen, head of commodity strategy at Saxo Bank, said in a note.

‘A recovery in Chinese demand combined with supply disruptions at mines in South America were the triggers that finally forced speculators back into long positions following the break above $2.50/lb,’ he added.

‘The risk of a second wave — especially in the U.S. and China, the world’s two biggest consumers — may force a rethink and we see no further upside during the coming quarter.’

Copper: A ‘V-Shaped’ recovery and beyond

The accelerating spread of Covid-19 in Chile, the largest producer of copper in the world, is driving the price of the industrial metal ever higher. Chile has in excess of 336,000 confirmed cases of the virus and the spread of Covid-19 amongst the mining community is causing production hours to be lost, straining the ability of producers to meet increasing demand. Chile accounts for more than 25% of global copper supply, according to Nick Cawley, strategist at DailyFX, part of IG Group.

‘The technical outlook for copper remains positive despite the industrial metal already rallying to a 15-month high from mid-March this year,’ Cawley said. ‘All three moving averages point higher, while the 50-dma has crossed the 200-dma to form a ‘golden cross’ a positive technical set-up.’

‘The chart shows copper making a series of lower highs from the March 19 low, underpinning the move higher, while a break and open above the recent high at $6631/oz. would confirm positive sentiment going forward, he added.

How to trade commodities with IG

Looking to trade the Copper and other commodities? Open a live or demo account with IG and buy (long) or sell (short) shares using derivatives like CFDs in a few easy steps:

  1. Create an IG trading account or log in to your existing account
  2. Enter ‘Copper’ in the search bar and select it
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

Please see important Research Disclaimer.

Trade on commodities

Trade commodity futures, as well as 27 commodity markets with no fixed expiries.1

  • Wide range of popular and niche metals, energies and softs
  • Spreads from 0.3 pts on Spot Gold, 2 pts on Spot Silver and 2.8 pts on Oil
  • View continuous charting, backdated for up to five years

1In the case of all DFBs, there is a fixed expiry at some point in the future.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.


Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.