Is copper a bargain before the US election?

Giles Coghlan LLB, Lth, MA Financial Source

The return to national lockdowns has been the catalyst for the recent global stock market fall. National lockdowns in Germany and France as COVID-19 cases surge sent the EUR plunging last week and stocks dropped with risk flows away from equities. This also meant that copper found some sellers as industrial demand takes a hit and reduces the demand for the metal. The recent bull run in copper has been very strong. The metal was able to easily brush off its original COVID-19 falls and make new ground on hopes of coming growth. However, the rise higher also makes it vulnerable for a correction lower.

Copper’s fundamental demand remains good

Copper stands to gain from the rise in green technology, so it is hard to see copper prices keep falling without seeing dip buyers step back.

Where and when might they return?

Well the first catalyst for a Copper dip buyer could be about to come next week. A crucial difference between Republican President Trump and Democrat Joe Biden is their differing proposals around Green investments. While President Trump is in favour of building roads, bridges, and airports and has not publicly shown much interest in ‘green’ investments. By contrast Joe Biden plans to spend $2 trillion over four years to improve infrastructure, create zero-emissions, public transport, and create clean energy jobs. A Biden victory this week would be a great gain for green investment, and copper demand. This is because all the wiring and conducting material needed for green tech relies heavily on copper.

If Biden wins and both houses fall under Democrat control it will be easier for Biden’s policies to pass. Biden is ahead in the polls, so buying copper the day before could be a shrewd move. However, it could equally go horribly wrong if Trump does another surprise and wins (highly unlikely) or if the US election end up being. Check out this article for a brief history of contested elections in the US. Either way, copper stands to gain over a longer term move into green tech, but will the US election be a near term boost for prices or will investors have to wait a little longer?

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Author

Giles Coghlan LLB, Lth, MA

Financial Source

Giles is the chief market analyst for Financial Source. His goal is to help you find simple, high-conviction fundamental trade opportunities. He has regular media presentations being featured in National and International Press.

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