Market Overview

Copper prices on the London Metal Exchange (LME) are little changed in February and are within the narrow range of $9700-9835 per tonne. This week prices fell slightly to $9720. Copper demonstrates little volatility even though it is a non-ferrous metal that usually performs high volatility.

However, this reflects a strong counteraction of various factors, not a sluggish market for copper. Copper is used widely in electronics, construction, instrumentation engineering, the chemical and pharmaceutical industry, consumer staples and more. The more the pandemic fades and business activity is restored, the physical demand for copper should also grow. On the LME copper stocks dropped by 8% from the beginning of January 2022. This reflects the rise in demand for copper and indicates its price may go up as well as some other commodities and risky assets.

On the other hand, there are many downside factors: the monetary tightening of the Federal Reserve (Fed) and other central banks, limitations on monetary supply, and interest rate hikes. Such actions make money expensive, limit profit margins in production and investments. This is seen to be curbing commodity prices ahead of the Fed meeting in March where monetary policymakers are set to hike interest rates.

This week the uncertainty of price movements in copper will likely continue as no major economic events are scheduled this week. However, investors may pay attention to the Consumer price index data from the United States on Thursday and the Fed Monetary Policy report on Friday.

Nevertheless, copper prices are likely to remain within the narrow trading range of $9700-9900 per tonne. Prices may even go down to $9600 as central banks tighten their monetary policies. Considering such uncertainties, no strategic positions should be initiated before significant directional drivers emerge.

Disclaimer:

Analysis and opinions provided herein are intended solely for informational and educational purposes and don't represent a recommendation or investment advice by TeleTrade.