What Is Driving the Copper Rally and How Sustainable Is It?
With the three-month copper contract recently touching $8,000/tn on the London Metal Exchange (LME), the question arises: What is driving the copper rally and how sustainable is it likely to be? The quick retreat of copper prices from these levels already has some suggesting the fundamental picture does not necessarily match what the price action would indicate, and inevitable at least some of the appreciation can be attributed to paper accounts (those which have no physical holdings) and market speculators. To what extent this is the case however needs to be assessed, evaluating what extent the economic recovery, and particularly economic growth in China, are having on the price of copper. As with the broader commodity markets, one of the main reasons for the sharp gains in copper prices in recent months is the global economic bounce, as the world comes out of the trough of recession and into what general consensus now deems at least the first stages of recovery. As with all commodities, the global recession hit copper prices hard, with the three month LME contract losing two thirds of its price in the last six months of 2008.Complete Story »