Market Quote: Copper Climbs Higher, Retail Investors Dig In
Author: The editor's desk
May 22, 2024
A mid-week analysis of what’s happening in global financial markets from the perspective of AGF’s investment management team.
Copper Whopper
Copper has been on a solid run so far this year. The universal spot price for the commodity climbed by 20% year-to-date through May 10 and has risen a further 10% since then. The initial move this year has been on the back of major mining companies running into operational issues, reducing copper supply. With the reduced production, supply-demand forecasts for 2024 have moved to a deficit and pushed the price of the metal higher.
The more recent move higher, meanwhile, can be largely attributed to a massive trade that is making the rounds, whereby many investors have gone “short” copper futures listed on the U.S. COMEX and gone “long” copper futures listed on the Shanghai Futures Exchange.* With the recent surge in July COMEX copper contract pricing, copper metal is being diverted from elsewhere in the world to the COMEX warehouse based in New York to cover these shorts.
This trade has added volatility to the relatively small copper market (one-tenth the size of the oil market). While we expect copper prices to remain at elevated levels versus history, the copper price is already moving lower as these shorts are being covered.
Retail Therapy
Global equity markets continue to hit new all-time highs as participation from retail investors surges in a way not seen in several years.
Trading volumes attributed to retail investors reached 55% and 52% of overall volumes in the U.S. on Thursday and Friday of last week respectively, according to research from the Mizuho Group.
Moreover, the U.S. Federal Reserve recently noted that allocations to equities among U.S. households, mutual funds, pension funds and foreign investors surpassed 50% for the first time in more than two decades.
*Being or going long means buying a stock and profiting from its rising value. Being or going short implies betting and making money from the stock falling in value. Futures are contracts to buy or sell a specific underlying asset at a future date. – Investopedia
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