Funds are struggling to navigate the copper market amid rising volatility, choppy trading patterns and weeks of lackluster performance. Despite the critical role copper plays in shaping the global trade landscape and its expected role in the nascent green-energy sector, the red metal has been beset by choppy trade patterns.
Volatility on the CME copper contract pointed to the challenges the fund faced in its efforts to predict future market movements as the globe transitions to renewable energy and clean technology. With rapid changes between bullish and bearish stances highlighting the difficulties associated with operating in a consistently narrow price range, long bull copper traders are finding it especially challenging to navigate the copper market.
They entered short positions in late January 2024 and into early February when it seemed as if copper prices would fall, but sharp rebounds by the red metal left them reeling. As copper prices have swung back and forth within the established range, funds have adopted both bullish and bearish positions on the CME copper contract several times over the past couple of months.
Investors have followed the metal’s attempts to break out of the established range in the past few months, an indication that momentum-tracking funds were moving in tandem with copper.
Because copper is expected to play a key role in the green-energy transition, many long-term copper bulls are looking to buy into the metal before soaring demand from renewable energy initiatives causes copper prices to surge. However, long-term investors waiting for a bullish copper market are staying away from daily trading and biding their time until the market offers better long-term options.
Funds took bearish positions on the CME copper contract last month then scrambled to cover as London Metal Exchange (LME) copper increased to $8,705 per metric ton, up from $8,250. February saw the funds adopt even more bearish positions and increase outright short positions to a four-year high of 95,825 contracts.
This was followed by a fall in copper prices before they surged to more than $8,600 a ton again.
Long positions gained some footing while net investor short positions fell sharply to a little more than 8,800 contracts from more than 42,300 contracts.
The LME Copper contract has fallen back into the middle of the $7,850–$8,900 range and is currently trading at $8,475 while managed fund positions on the CME copper contract have flipped between short and long as copper goes through sporadic declines and rallies within the range.
Major producers of copper, such as Southern Copper Corporation (NYSE: SCCO), will likely keep tabs on these market movements as any upswing could mean higher returns for them.
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