Because of its importance to housing, automotive and other manufacturing, copper prices have been a bellwether for the global economy, and now declining prices are reflecting a chill. “We had a huge run up to $4 [per lb.],” says Thomas J. Farmer, a technical analyst at RJO Futures. But since then, the London Metal Exchange and the Shanghai Exchange have been seeing a rise in their stocks and prices have declined precipitously to about $2.50 in the second week of January. “Being short is probably your best bet right now,” Farmer says, adding that copper could trade as low as $2.20 in February.
Michael Gehrman, senior commodity specialist at American National Trading, says apprehension over the U.S. housing market and uncertainty of Chinese demand have been a drain on prices, adding copper tends to follow geopolitical uncertainty to the upside and manufacturing demand on the down side. He pegs $2.30 for a low and $2.80 for a high.
“We hit a big number yesterday, $2.5250, and that satisfied a lot of selling pressure,” says Rod David, president of Avidtrader.com. “Now sellers are pushing on a string. They have lost traction and trapped themselves for a classic short squeeze.” With copper meeting a target, David expects copper to pop up to $2.75 in February.