Copper Price Forecast 2016
For the past several years copper futures have been constantly going down. There were some minor quarterly reversal on hopes of investors of a stronger economy in China, but the time showed that the industrial sector continues to slowly decline, despite the best efforts. In short, if the US Dollar continues a bullish trend in 2016, and if prognosis of Chinese economy remains gloomy, there is no hope to see any metal futures going upwards.
According to insider information nine of the largest producers of copper have made a deal to curb supply of copper by 200,000 metric tonnes in order to stabilize prices in 2016 and level the supply and demand if China continues to purchase less copper this year. Until the implementation of these cuts later this year, copper price is definite to remain under pressure. In case of further lows, the suppliers may consider even further cutting of production, offsetting many operations and cutting jobs, as it may become financially unsustainable to continue mining under such pricing conditions. Such actions may be the reason of further lows of copper futures, until the limited supply has any effect on the market.
Copper Price Forecast 2016: Predictions on copper prices this year and factors that can affect it
In detail, if the US economy continues to recover and employment rate is stable, as during the 2015, the currency will put major pressure on all commodities, copper included. At the same time, China, the country that accounts for over 40% of global copper demand, has slim expectations for growth in 2016. This may be the main reason to see the copper prices drop even further to $1.8 or even $1.545 lows of December 2008, according to technical analysis of the monthly and yearly chart. There the commodity may finally “look for a reset button” and reverse its downward trend that began in 2010. But for now the price consolidated just above the psychologically important $2.00 mark waiting for further moves.
In such conditions it is very risky to place upward counter-trend trades and expect a growth in the long term. The main goal of traders right now is to wait for the target price mentioned above. If the trend breaks this resistance line and continues downwards, investors should look for exhaustion signals. If, on the contrary, there is a rebound, it is a strong signal to place a long upward trade.
The main indicators of copper prices performance next year are: China GDP, Chinese export volume, US Dollar trading, European construction and automotive growth. Slow growth of Chinese economy with weak export figures may cause a further downward movement. Strong US Dollar with a sharp break in precious metals, like gold and platinum, may be another catalyst for a sell-off.
Finally, don't forget that copper is considered to be a bellwether of the health of global economy. And it is a strong indicator of whether the global crisis has ended or not. But taking into account the negative trend in commodities over the past few years, new lows should not cause any major crisis, but simply indicate the stagnation of economy, particularly in China.