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Copper Falls After Strongest Weekly Rally in 36 Years

November 16, 2016 at 18:11 by Andrew Moran

Copper futures have been unable to sustain their rally as traders speculate an upcoming correction. Despite surging Chinese investment in the industrial metal and favorable US presidential election results, copper futures could not maintain last week’s rally, which saw the red metal have its best week since 1980.

December copper futures decreased $0.0325, or 1.21%, to $2.47 per pound at 16:43 GMT on Wednesday on the New York Mercantile Exchange. Copper hit a high of $2.75 a pound on Friday, which is the highest level since January 2015, before cratering about 10%.

Overall, copper prices are up 19% from their October lows.

Copper was making considerable gains following the results of the 2016 US election. Investors are betting that president-elect Donald Trump would follow through with his pledge to spend $1 trillion over the next 10 years to rebuild the nation’s infrastructure. Copper prices also rose on news of declining warehouse stocks and recent production outages.

With other nations boosting infrastructure spending, such as Canada, the UK, and China, the demand for copper will be high. Today, China and the US are the world’s largest consumers of the industrial metal.

Despite the spike in copper prices, experts are projecting a correction soon, according to William Adams, head of Research at Fast Markets Ltd.

Prices ran ahead of themselves. We’ll probably consolidate this week after the froth of last week

The reasons for the correction include investors wanting a clearer understanding of the president-elect‘s government spending plan and the latest Chinese economic data released this week.

Analysts are worried that copper investors will be hit by the correction, especially since their net long position in copper futures skyrocketed 150% to a record 59,300 contracts in the week to November 8 on the Nymex.

The general consensus is that copper will surge in the short-term, but the world’s supply and demand will not be altered in any significant way in the long-term.

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