Investing in Copper: What to Consider?
A popular commodity, copper continues to be a prime target for many investors searching for potential profit opportunities and those keen on adding more diversification into their portfolios. Copper is traded like the majority of other metals, with many of the same basic principles applying. It has become one of the most popular metals in humanity’s history due to the fact that it is extremely malleable. Some traders mistakenly believe that copper is the forgotten stepchild of gold or silver. This couldn’t be further from the truth. There is an opportunity in copper.
WHO SHOULD INCLUDE COPPER IN THEIR PORTFOLIO?
Day traders: Copper can be part of a trader’s short-term strategic plan. On eToro, any trader can easily buy and sell copper in a matter of seconds. This provides flexibility and the ability to maximise on opportunities that may arise throughout the day.
Metal investors: Those always on the hunt for a new commodity should seriously consider copper. When compared to gold, silver or platinum, there is no evidence that there is higher or lower risk, or that the potential returns are worse.
Currency traders: Enthusiasts of currency pairs should think about trading commodities in general, and more specifically, copper. There is a lot of knowledge overlap, allowing traders who have currency experience to learn about copper at a fast pace.
Diversifiers: In today’s age of online investment, diversification is king. Almost all financial experts believe that a diverse portfolio can limit your exposure and increase your chances of potentially earning a profit.
WHAT DRIVES THE PRICE OF COPPER?
Supply: The cardinal rule of supply and demand. Increased supply could lower prices if the demand is not there. Vice versa as well, with prices rising if supply cannot meet increased demand.
Aluminum: Companies are constantly on the lookout for cheaper alternatives. Aluminum is one such alternative, now used more frequently in wiring and radiators. It is imperative to track the price of aluminum when trading copper, as there can be a direct price correlation.
Internal strife: By far, the largest provider of copper in the world is Chile. As a result, internal strife, political tensions and other political disruptions can cause a decline in available supply of copper. This could result in an increase in value in the short term.
COPPER: MORE POPULAR THAN GOLD
Copper is arguably the most common commodity in the history of civilisation. Its abundant use in society cannot be ignored by traders of all types. The metal can be found commonly in cars, televisions, generators and many other household appliances. This widespread use is a prime indicator that copper will always be in demand in one form or another. The only question traders need to ask is how much? The demand can obviously affect supply, and with technology changing at an alarming rate, it remains unclear how much copper will be required to propel the global economy forward.
THE HISTORY OF COPPER
It is believed that copper was first used by humans roughly 10,000 years ago. However, its prevalence has increased dramatically over recent years, rising by more than 95%. Copper was discovered in several regions throughout the world, where tribes developed smelting techniques independently from each other. This includes areas such as modern-day Iraq, China, parts of Africa and the Americas.
To this day, copper is often used to make coins. Ancient Romans crafted their currency from copper, much like it is done today in the United States and other countries. Copper could also be found in historical science, in places such as Egypt and India.
More contemporary periods have seen the rise of electrical wiring, which consumes about 60% of all mined copper in the world. Unlike oil, where oil rich countries have wielded the commodity in the form of a political weapon, copper rich countries have never enjoyed the same significance. It could be argued that the primary reason for this is that the United States is the fourth largest producer in the world. While other leading producers sought to create an OPEC style coalition for copper, the United States never joined. The coalition disbanded in the late 80s.
CONCLUSION: COPPER IS STILL RELEVANT
Despite some turbulent times, copper remains an undeniable force in the financial markets. Its prevalent use, ease of extraction, and superior flexibility ensure that it will continue to be used, at least in the short term. But traders should not take their eyes off the ball. There are many reasons that could cause a decline in demand for copper, as outlined above. . It is imperative for traders to track all of the information available in order to make the most informed decisions.
It is also crucial to remember that copper does not exist in a bubble. Similar to the majority of other assets, fluctuations in the value of certain metals could cause a ripple effect that could change the value of copper. In addition, strength of the markets, economic policy and the innovation of new technology can also alter the value of this popular metal, for better or worse.
Despite this myriad of possibilities, traders should not be hesitant to try their hand in copper. It has the potential to offer plenty of opportunities. All traders need to do is be ready for them.
*This content is for information and educational purposes only and should not be considered investment advice or an investment recommendation.
*Past performance is not an indication of future results. All trading carries risk. Only risk capital you’re prepared to lose.
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