Copper Futures - March contract
March copper futures ended the week in positive mood, closing marginally above the 400 price point at 401.30 and ending with a narrow spread up candle, which built on the momentum from earlier in the week, which saw the base metal climb from a low of 370, and end with five consecutive days of gains. Indeed with the strong break and hold above all three moving averages on Wednesday, this has given us a strong buying signal, and with both the 9 day and 14 day moving averages about to cross above the 40 day moving average then this is adding further momentum to the positive tone for the metal. In the short term, we can expect to see the high of November breached in due course, and once clear of the 410 price level, then this will provide the necessary platform of support for further strong gains and a continutation of the longer term bullish trend in due course.
From a fundamemental perspective copper prices are continuing to gain due to two principle factors. The first of these is the ongoing supply/demand relationship, with copper mines still struggling to meet demand, particularly from China, whilst the second issue concerns the ‘mystery’ buyer who is alleged to be building a dominant position in the market according the the Financial Times -
Mystery trader captures 80pc of London’s copper market
The unknown buyer has been building up the dominant position since at least last week, putting a squeeze on the market. According to the rules of the London Metal Exchange, the trader must lend out copper if it holds between 50pc and 80pc of the total to maintain day-to-day liquidity in the market. The trader is currently lending at a 0.5pc premium to the cash price. The premium for spot price copper over delivery in three months’ time reached $89 in the middle of this week – the highest in two years.
Both of the above factors are helping to support copper prices, and drive the commodity higher, and indeed this trend looks set to continue for some time to come, and as such we can expect to see the longer term bullish trend extend well into the first quarter of next year.
