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.

Copper is often viewed as the barometer for the global economy. This is simply because of the role the metal plays in the world. Because of its conduction characteristics, the metal is used in the manufacture of electronics. It is also used in the utility industry. Therefore, if the world economy expands, it means that the demand for the metal rises. If there is tepid global growth, it means that the demand for the metal decreases. Most of the world’s copper comes from countries like Chile, Peru, China, and the Democratic Republic of Congo. The biggest of its miners are Codelco, Freeport-McMoran, and BHP Billiton among others. £

Last year, copper production rose by 1.7% to reach 20 million metric tons. Of this, Chile represented about 28% of the world’s total. The growth in Chile however is skewed considering the long strike that happened at Escondida in 2017. In the same year, work at Grasberg mine in Indonesia also stopped as workers striked for more pay. This year, the forecasts show that supply will continue to rise.

The general health of the global economy will be the main driver for copper. The recent rally is mostly because investors expect a deal between the United States and China may help increase the demand. The chart below shows that the demand will rise this year and in 2020 in all the major geographies.

Like all metals, the price tends to move according to the underlying economic picture. A better global environment means that demand rises and vice versa. Therefore, in the coming days, traders may continue to pay close attention to the ongoing trade talks. Today, China’s vice premier Liu He will be in Washington. He will hold high level discussions with Steve Mnuchin and Robert Lighthizer. A deal between the two countries will likely lead to a higher price of copper because of the perceived rise of demand.

As shown in the chart below, the price of copper has continued to rise this year. It has reached a high of $2.78. The price has remained above the short and long-term moving averages while the average directional index has continued to increase. There is a likelihood that the price will remain being volatile. This is evidenced by the Average True Range (ATR)

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