Thursday, September 6, 2012

Copper Traders Bullish on Stimulus Expectations

There is no doubt that stimulus expectations are the economic story and source behind the rise in stock prices and commodities, as investors and traders are basing their strategy, for the most part, on the belief there will be plenty of more stimulus in the near term to battle the faltering global economy from various countries, including the Federal Reserve in the U.S.

That has resulted in a much more bullish outlook for copper, which is now more favored by analysts than it has been in about 11 months.

With that in mind, hedge funds are starting to re-enter copper for the first time since May, expecting copper prices to jump in response to the stimulus they're looking for.

Another factor is that copper watched by the London Metal Exchange show that stockpiles it monitors have dropped to four-year lows for the metals, generating the probability that supply may struggle to meet demand if the stimulus efforts result in increased global business.

In the first half of 2013, Barclays Plc says that it expects demand to climb above supply for copper, while in the second half increased production should push prices down as demand decreases.

China is also part of the overall equation, as it cut its industrial production estimates for 2012 to 10 percent from 11 percent on September 5. China accounts for 40 percent of all copper consumption.

Europe is another concern, as the contracting region accounts for 18 percent of copper consumption, and a slowing North American economy, 11 percent.

1 comment:

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