Crispus Nyaga

Crispus Nyaga is a Nairobi-based trader and analyst. He started trading more than 7 years ago as a student. He has published in several reputable websites like The Street, Benzinga, and Seeking Alpha. He focuses mostly on G20 currencies, commodities like Crude oil and Gold, and European and American large-cap companies.

In January 2016, the price of copper reached a multi-year low of $1.935. It then started a major rally that saw it reach a high of $3.32 in December last year. Since then, attempts to continue the upward movement failed and this year, the metal has fallen to a low of $2.561. This is the lowest level since June last year.

Copper is known as the barometer of the world’s economy. A rising copper price is known to indicate a strong economy while a falling copper price is a measure of potential risks in the market. The trend this year is a good testimony to this. As the trade conflict issue has gotten out of hand, the price of copper has fallen in the anticipation of the worst.

This year’s price decline is also an indication of the cyclical nature of natural resources. Historically, their prices have fallen after a sharp increase because of increased production. The demand in 2017 was so high that the market reached a deficit. This was mostly because of a prolonged strike in Chile, which is the world’s biggest copper source. This year however, the supply has grown as companies seek to benefit from the stronger price. A study by the International Copper Study Group showed that supply had increased by 5.7% in the first five months of the year. This resulted to a surplus of more than 20,000 tonnes. The table below shows the key statistics on copper.

As the supply increases, and as the trade conflict appears to continue, the chances are that the price of copper will continue moving lower.

Copper reached 1.1586, which is the lowest level since May this year. The risks of the strike at Escondida – the largest mine in Chile – have not prevented bearish traders from dominating the market. This price is below the 50 and 100-day moving average. The RSI is currently at 31 on the 8-hour chart and shows signs that it will continue to fall further. Therefore, there is a likelihood that the price of copper will continue to fall further.

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