Short covering boosts copper

Copper is up 0.4% as traders close out their short positions after last week’s selloff.

This short-covering activity has pushed the price of the red metal up to 295 cents per pound. Last week copper lost over 4.8%, suffering its worst-performing week in 11 months, but the financial markets do not move in straight lines and it is not surprising that the metal is higher today. Last week’s selloff was triggered by weak economic data from China, when declining exports and industrial production confirmed traders’ suspicions that the country is slowing down.

While Chinese economic data continues to slide, the situation in its credit market also continues to deteriorate. The People’s Bank of China (PBoC) has been forced to intervene and ensure the lines of credit between banks run smoothly. The more the PBoC loosens monetary policy, the more speculation will ramp up that China is depending too much on credit.

In the short term, we could see copper head towards the 200-hour moving average level of 304 cents per pound. If the foreign direct investment figures from China due for release overnight disappoint, we could see copper slip below the 294 cents per pound mark.

High Grade Copper chart

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Find articles by analysts

This information has been prepared by IG, a trading name of IG Markets Limited and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. International accounts are offered by IG Markets Limited in the UK (FCA Number 195355), a juristic representative of IG Markets South Africa Limited (FSP No 41393). South African residents are required to obtain the necessary tax clearance certificates in line with their foreign investment allowance and may not use credit or debit cards to fund their international account.