Copper Prices: Glencore Shutdown Could Trigger A Rally

Copper is in a bear market. If you read us, I am sure you knew that.

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However, two factors make us think that copper prices could rise in the next few weeks:

1. Prices fell too fast

Copper zig-zagging since 2011
Copper zig-zagging since 2011. Graph: MetalMiner.

Copper prices slumped below $5,000 a metric ton in August for the first time since the financial crisis. In less than 4 months prices sank 25%. Prices don’t move in a straight line, they zig-zag (see chart above). After this sharp drop, it wouldn’t surprise us to see prices being supported as bargain hunters come into the market, causing prices to rally.

2. Production Cuts

While prices are looking attractive for bargain hunters, the mining giant Glencore PLC just announced that it would suspend production at two copper mines in Africa. This could give more reasons for those investors that like to pick bottoms to get into the market.

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Chinese economic growth is slowing, and we believe that’s bigger than the company cutting production, so nothing indicates that we are at the end of copper’s bear market yet. However, these production cuts could likely make prices rally in the short-term.

What This Means For Metal Buyers

Copper is in a falling market, therefore it’s risky to take long-term positions. However, even in bear markets buyers need to pay attention for opportunities to buy for short-term demand. In the case of copper, this could be one of them.

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