One of the latest lessons we have learned from nature is the importance of a healthy life and green energy. The global transition to green energy, especially following the COVID-19 pandemic, has sent Copper to an 11 year high, but why?
While everyone was focused on cryptocurrencies for trading or investment opportunities, many people were unaware of industrial and precious metals. Now, besides Copper, the Nikkei has risen to its highest level since 2014 as well.
In crises, we have the beginning, the challenging time, and then the transition. Commodity-based shares and assets usually are in a selling pressure at the beginning of a recession while afterwards the low prices are usually attract buyers attention on the anticipation of a recovery, where production will return to full capacity, and require more raw materials. However, when it comes to bigger changes, the value and importance of raw materials also change. In Citigroup and JPMorgan, Wall Street analysts, like many other investment institutes, predict a new commodity “supercycle,” where demand streaks ahead of supply, creating a prolonged rise in prices.
Shifting consumer habits to green energy from fossil fuels will raise demand for Copper, which will be used more in wiring and electronic cars. We should not forget about renewable energies, such a Wind and Solar Energy, all of which means more demand for Copper. Overall copper demand could double by 2050, according to miner Glencore.
“We expect to see a stunning economic upswing and a supportive environment for the copper market and investors as the year unfolds,” said Brian Kloss, a portfolio manager at Brandywine Global, part of Franklin Templeton.
“Longer term, copper is an important component in renewable energy and electromobility.” – Financial Times
And supply?
According to CRU data, after a decline in production in 2020, 3.1% growth is expected in 2021. “The growth could be higher, but we anticipate that it will be difficult to operate in a 100% normal way. COVID-19 effects such as workforce reductions and the postponement of activities will have effects on production,” CRU base metals analyst Eric Heimlich said during a webinar organized by Chilean mining association Sonami. (bnamericas.com).
After all, how quickly the economy will return and develop will influence the real demand for the next few years.
Technical review:
Copper in the daily chart is clearly moving in the OB zone, as RSI is at 87 and market volume is rising; however, since the price is above the main MA lines and trend line, it supports the uptrend in the daily chart with the possibility of a correction. PP at 4.255 is a key level, while the 11-year high at 4.3727 is R1. On the other hand, H1 charts show that the new Higher high is lower, while RSI is falling towards 60 and OBV is flat, which confirms that in order for the short-term correction to reach S1 4.20, a breach under PP is necessary.
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Ahura Chalki
Regional Market Analyst
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