Copper analysis and chart
Article written by IG Technical Analyst Vincent Boy
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While global markets continue to anticipate a “soft landing” and remain at their highest levels, the price of copper, which is a relevant indicator of the health of the global economy, is correcting sharply and is at its lowest level since November.
The red metal is used in many industries, such as real estate, communications, and even increasingly in activities related to the energy transition. In fact, apart from wind turbines, which require a lot of copper, building an electric car requires 4 to 8 times more copper than a combustion car.
This points to a bright future for copper over the next few decades, when demand is expected to skyrocket. Moreover, the large deficit between supply and demand, which was already observed before 2020 and which increased sharply after declining investment during the Covid years in particular, should be very positive for the price in the long run.
However, it has fallen by more than 15% since its highest level at the start of 2023, after rebounding during the last quarter of last year on the back of the reopening of the Chinese economy. China accounts for more than 50% of the world’s copper demand.
Thus, although the long-term outlook is very positive, the risks of a slowdown in the global economy, or even a recession and a softer-than-expected economic recovery in China should keep the copper price under pressure, but offer an interesting buy. Opportunity for a long term horizon.
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Daily copper price chart
Copper price is correcting by more than 15% since the beginning of the year, and after reaching an important target at the lowest levels observed since January 4, and after maintaining the 2020/2022 slant support, it is accelerating downward.
The sloping break confirms the bearish outlook for the red metal, and it should reach its next target located within the support range that started bouncing at the end of last year, and is located at $3.25/$3.30. The latter has also acted as resistance on several occasions in 2017.
Below the latter, we expect a quick return to the $3 mark. The deterioration of the general economic situation should support this view.