Copper prices are approaching record highs in 2024! Supply disruptions + dollar weakness + gold flying, how long can it rise?

On Tuesday (October 7), during the Asia-Europe session, the LME copper price broke out of the trend of rising and falling, and is currently up 0.24%, trading at $10,678/ton. It is worth noting that after the copper price opened 0.46% higher on Monday, it rose to 10,800, a new high for one and a half years, and then fell back. After a short respite, copper prices are expected to continue to rise.

The shutdown of major mines has tightened the market, with copper prices on the London Metal Exchange (LME) approaching record highs for 2024. Other metals have also performed well, with gold approaching the $4,000 mark and silver approaching the $50 mark.

In this copper market analysis article, we will focus on the reasons why copper prices may rise further.

After the plunge in July, copper prices regained their luster

In recent months, US copper prices have rebounded significantly, and after falling sharply in late July, they resumed their upward momentum in October.

The previous fall in July stemmed from Mr. Trump's surprise announcement that unprocessed copper raw materials, including copper ore and refined copper, would be excluded from the tariff list. The decision came after US copper imports and prices rose sharply above global benchmarks, sending copper inventories on the New York Mercantile Exchange to their highest levels in more than two decades. But as markets digested the sudden news, traders quietly began to increase their copper holdings.

It is worth noting that LME copper did not follow the US copper price too much downward adjustment in this copper crisis. Under the dual effects of easing speculative pressure and recovering physical demand, London copper futures prices have approached the record high of nearly $10,915/ton set in May last year.

Supply disruptions provide support for copper prices

Similar to crude oil, copper prices tend to move according to supply-side conditions, and recent events have confirmed this logic. Freeport-McMoRan announced force majeure clauses after production disruptions at Grasberg, the world's second-largest copper mine, flooded underground tunnels due to mudslides. Unfortunately, all five workers who were initially missing were confirmed dead, and the company subsequently lowered its production forecast for the rest of the year.

The tragic event, combined with ongoing supply tensions at other major copper mines, has created a solid floor of support for copper prices. Although US copper inventories remain high, they are slowly falling back, and traders appear to believe that short-term supply constraints will be enough to offset the impact of high inventories.

Copper prices follow the trend of weakening gold and the dollar

Copper prices are not alone - buying is underpinning a wide range of metals. Gold hit a record high today, approaching the $4,000 mark, while silver is nearing its 2011 peak of nearly $50. What are the common drivers of these metals' gains? It is the expectation of a Federal Reserve rate cut that is expected to boost the global economic recovery. It is macro uncertainty, a weaker dollar and continued demand for hard assets that together drive the overall commodity upside.

In the absence of a large-scale sell-off, gold prices broke through another important round number, further strengthening bullish momentum.

Gold breaks through $3,900, expected to test the key $4,000 mark

Gold's strong performance this year has not been driven solely by speculation. Instead, it has been supported by multiple overlapping trends that have shown resilience throughout the year. Many of these factors are likely to remain influential in the second half of the year, keeping the outlook positive.

An important source of support for gold has been buying by central banks - safe-haven demand and concerns that the purchasing power of global fiat currencies is being eroded by inflation. Many central banks may see gold as a necessary hedge against geopolitical risks, driving central banks to continue to increase their holdings of gold.

There is no doubt that the weakness of the dollar has accelerated gold's rally. The dollar has had one of its worst years since the early 2000s, and further recent losses have been linked to the US government shutdown. Clearly, the euro weakened today due to the unexpected resignation of the French prime minister, and the yen also fell due to the Japanese election. The weakness of these two currencies provides the dollar with temporary respite. But until the government shutdown ends or economic data improves significantly, I don't think the dollar will achieve a substantive rebound.

As a result, a weaker dollar, stagflationary pressures and a general perception that the dominance of the US economy is being challenged are driving gold prices higher. On top of that, another cut in interest rates by the Federal Reserve has also increased the relative attractiveness of interest-free assets such as gold. This factor has also supported copper and other metals prices.

Technical analysis:

The LME copper price rose according to the rising channel. In the past two days, the pullback has not fallen below the middle track of the rising channel, nor has it met the 5-day line, so it is currently expected to challenge the rising channel. As long as the closing does not fall below the 5-day line, the copper price shows no signs of turning and is expected to continue to rise.

(LME copper daily chart, source: Internet)

Long-term copper market analysis: Electrification trends support optimistic outlook

Looking to the longer term, our copper market analysis shows that the macro backdrop remains strong for copper prices. Global electrification, from electric vehicles to renewable energy grids, is continuing to support long-term demand for copper. Copper's indispensable role in power lines, energy storage, buildings and green technology means its strategic importance will only grow.

As the global transition away from fossil fuels accelerates, the world's demand for copper - the life infra of the clean energy economy, from electric car motors to charging infrastructure to solar panel networks - will surge. This structural demand, combined with continued tightening in mine supply, suggests that the current upward trend in copper prices may be just the beginning of a major new bull market.

Beijing time 19:31, LME copper is now quoted at $10,682/ton.