Copper, a pivotal industrial commodity closely tied to the U.S. dollar and interest rates, may be poised for a resurgence above $4 per pound in 2024. The CPER ETF, reflecting copper prices, and Freeport McMoRan (FCX), a leading copper producer, stand to benefit from this potential uptrend.

Fed Influence on Copper

The recent actions of the Federal Reserve (Fed) have played a significant role in shaping copper’s trajectory. The Fed’s shift from a hawkish to a more dovish stance, coupled with a forecast of rate cuts in 2024, has prompted a rally in copper prices. As of December 19, copper reached over $3.90 per pound, showcasing a positive response to the Fed’s policy adjustments.

Inventories and Climate Change Impact

Examining LME and COMEX inventories reveals a slight decline from November to December, indicating a potential tightening of copper supply. Moreover, addressing climate change, particularly achieving NetZero carbon emissions by 2050, necessitates a considerable increase in copper mining. With only 700 million tons mined in history and a requirement of 1.5 billion tons by 2050, the demand for copper is expected to rise substantially.

China’s Economic Influence

China, the world’s leading copper consumer, has been a key factor in copper’s price fluctuations. Despite economic weakness in late 2023, there are optimistic expectations of a rebound in the Chinese economy. China’s commitment to supporting alternative and renewable fuels, integral to addressing climate change, further supports copper prices due to its essential role in green energy initiatives.

Long-Term Bullish Trend and Analyst Insights

Copper’s historical price chart, dating back to the early 1970s, indicates a long-term bullish trend characterized by higher lows and higher highs. Analysts suggest that the recent drop from the March 2022 high of $5.01 to $3.8980 per pound reflects increased worldwide demand and limited supplies at the current price point.

Investment Options

Investors seeking exposure to copper can consider the U.S. Copper ETF (CPER), which trades on the NYSE Arca. CPER, with nearly $130 million in assets under management, has closely mirrored copper’s rally, moving 10.4% higher from October 23 to December 1.

Another avenue for copper investment is Freeport McMoRan (FCX), a leading copper producer. FCX, with a market cap of nearly $59.3 billion, experienced a 19.3% appreciation in its shares from October 23 to December 1. The rally in FCX shares suggests investor confidence in rising copper prices in 2024.

Outlook for 2024

While addressing climate change supports copper prices, the economic conditions in China remain crucial for copper’s path in 2024. A potential Chinese economic comeback could drive copper prices higher as demand rises, inventories decline, and mine supply struggles to keep pace.

In conclusion, the odds favor higher copper prices in 2024, but the volatile nature of the commodity market necessitates caution. Investors should leave room for adjustments in their risk positions, remaining vigilant to potential market fluctuations.

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