Strong Global Demand Lifts Copper ETFs to One-Month High

ETF Trends

Copper has strengthened to a four-week high Friday, with the base metal-related exchange traded funds testing their long-term resistance level, on the revitalized global economy and expanding construction in the U.S.

The iPath Dow Jones-UBS Copper Subindex Total Return ETN (JJC) , an exchange traded note, has gained 5.5% in a little over two weeks and is now testing its 200-day simple moving average. However, JJC is still down 6.5% year-to-date.

COMEX copper futures were slightly positive early Friday, trading around $3.173 per pound.

Through Thursday, copper prices rose for 10 consecutive days, the longest rally since June 2005 and rose 10% from a 44-month low in March, reports Luiz Ann Javier for Bloomberg.

Copper has been strengthening on renewed optimism over global economic growth and an accelerating U.S. recovery, reports Frik Els for Mining.

LME, New York and Shanghai copper inventories declined 50% in 2014, dipping to a six-year low Thursday. Global refined copper market unexpectedly fell to a shortage in March and a 205,000 ton deficit for the first three months of the year, compared to a 206,000 ton surplus for the same period in 2013.

“With stronger demand, we’re seeing inventories decrease, and certainly that’s going to be bullish for prices,” Fain Shaffer, the president of Infinity Trading Corp., said in the Bloomberg article. “Strong economic conditions here and overseas over the short term will drive prices higher.”

Meanwhile, China, the biggest consumer of the metal, has hoarded a record high 115 million tons of the commodity and demand is slowing. China has seen copper prices fall relative to other markets after a crackdown on metal financing. [Copper ETFs Blemished After Chinese Investigation]

“Shanghai premiums being so low, it is more profitable for traders to sell in many other locations,” Ivan Szpakowski, a commodities strategist at Citi Research, said in a Wall Street Journal article. “The phenomenon that we are seeing is premiums are higher when the vessel is farther away from China’s shores and as it approaches, the premium falls.”

The higher premiums to sell copper in other overseas markets suggest that global demand still remains strong.

Other copper funds include iPath Pure Beta Copper ETN (CUPM) , which is down 6.2% year-to-date, and the United States Copper Index ETF (CPER) , which is down 6.6% year-to-date.

iPath Dow Jones-UBS Copper Subindex Total Return ETN

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For more information on copper, visit our copper category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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