Amid Bull Markets In Precious Metals, Copper Holds

When writing about gold and silver, many people love to note that the metals are priced in dollars. This leads to a host of complexities; if you’re trading in European money, for instance, then a strong dollar can make copper that much more expensive. A weak dollar would have the opposite effect. But what many people forget is that gold and silver are not the only metals with this particular trait. Another important metal is traded in U.S. dollars: copper.

The Wall Street Journal noted that early this morning when describing copper’s bouncing around between ups and downs. Because the European Central Bank made it clear that rate cuts could potentially be looming, the dollar itself is poised to remain strong against the European currency, at least for now. That means that copper prices, rendered in dollars, may have some stake in this stability as well.

What Else Is Tied To Copper?

Although copper is strongly tied to the U.S. dollar, as are gold and silver, the industrial metal is tied to other sectors as well. The most obvious is manufacturing. With jobless claims falling to a 43-year-low recently, we’ve finally received some positive news on the manufacturing front. If industry is strong in the United States, it drives up demand for the industrial metals - copper perhaps chief among them. If a gold and silver investor constantly watches monetary policy in the U.S. and abroad, a copper investor should watch both monetary policy and industrial news.

Perhaps it’s no surprise that copper recently hit a four-week high. But this four-week high has more influence than just the US industrial sector, and the strength of the dollar. There’s another element at play here that no copper investor will ever want to forget - the influence of China.

China’s Influence On Copper Recently

Supply and demand ultimately rule the prices of commodities, and China, like the U.S., is a major force for demand. That’s why a recent economic report of “improving demand growth” from China helped send copper to higher levels. Investors who know that a strong Chinese economy can lead to strong copper prices are quick to flock to the metal when they see the writing on the wall.

Xiao Fu, the Head of Commodity Strategy for Bank of China International, said: “Sentiment should remain positive over the coming months, though momentum may slow slightly over the summer when industrial activity tends to be slower."

This should give copper investors an indication of what’s ahead for the industrial metal. Although there are several important factors that help determine copper’s price, including currency strength, domestic industrial growth, and international industrial growth chief among them, it’s important to take in all of these variables before you make an investing decision.

One potential wrench: a U.S. Federal Reserve meeting coming up next week. Although it’s expected that interest rates will hold on to their current levels, anyone looking for clues into the movement of metals will try to interpret the Fed’s statement for any indications about their future direction. This meeting could have major consequences for the 2016 outlook for copper and beyond.