What is copper trading and how to understand copper prices?
Ben Lobel February 10, 2021 8:39 AM
Discover the history of copper trading, and find out how to trade the copper price today.
Copper is a metal of diverse utility – with application in industries ranging from agriculture to construction – but it is also a commonly-traded commodity by market speculators. Discover the history of copper trading, learn more about the supply and demand factors that move its price, and find out how to trade it today with City Index.
- History of copper trading
- History of copper price
- Why trade copper with City Index?
- Types of copper assets
- What affects the copper price?
- Trade copper on MT4
- How to trade copper on City Index
History of copper trading
The history of copper trading goes back thousands of years. Bronze Age Mesopotamians were probably the first to familiarise themselves with the commodity, and early societies would use copper as a bartering tool, measuring its value against items such as food and livestock.
While it’s been used since Roman times for coins, together with gold and silver, copper had a low inherent value due to its abundance. This means that, unlike gold, it has never carried the status of a monetary standard.
Today, copper is used in a variety of industrial processes, with its pliability and strong electrical and heat conductivity making it useful across a diverse range of sectors. Supply and demand factors in relation to its industrial use have been a strong influence on the copper price over the years. The commodities boom of the 2000s saw copper rise sharply in price, with its value almost quadrupling from 2004 to 2006.
History of copper price
Take a look at the recent history of copper price, documenting the fundamental drivers that impacted the metal’s price movements since 2011.
Why trade copper with City Index?
Copper’s price movements are closely linked with economic activity, so if you like to follow developing markets, you may be interested in the copper price movements caused by patterns of infrastructure development worldwide.
Discover more reasons to trade with City Index.
Types of copper assets
There are various types of copper assets available for trading. The first distinction is between COMEX and LME, the markets on which the metal can be traded. COMEX is part of the New York Mercantile Exchange (NYMEX), where copper is priced per pound, while LME copper refers to copper traded on the London Metal Exchange, which is priced per tonne.
Futures are based on the price of the underlying commodity and are traded by defining a price for buying or selling on a future date. Copper futures are popular instruments to trade which means liquidity is generally good, so it will be potentially easier to buy and sell the contracts you’re interested in.
Futures contracts typically use leverage, traders can increase their exposure to the market by paying less than the full value of the contract, which increases potential gains but also increases risk accordingly.
Where permitted, you can also trade copper using its spot price, which is based on the price of the asset at the present time. Also, traders who prefer shares can trade companies with exposure to the copper market such as mining companies.
What affects the copper price?
There are a variety of fundamental factors that affect the copper price, and these should be researched before trading the metal. Knowing the likely drivers of the value of the metal will give traders more information with which to prepare their positions. These factors include the state of the economy, supply problems, the housing market, and alternative metals.
During periods of economic growth, development in infrastructure may increase, causing a high demand for copper and therefore pushing up its price. If this high demand for the industrial metal is met with oversupply, the price may fall again. Conversely, during periods of economic decline, projects that require large amounts of copper may stall, pushing down demand for the metal and hitting its price.
Markets such as China, India and Brazil that have seen strong growth have caused a high demand for copper in recent years.
Supply problems can affect the copper price in a variety of ways. Natural disasters such as earthquakes, human resource issues such as worker strikes, and political influences such as trade wars can affect mining output and supply chains, and cause prices to rise.
Since copper is a key material in the construction industry, particularly for use in plumbing and wiring, the health of housing markets can be a strong driver of copper prices. If there is a housing boom in a particular territory, there may be a considerable demand for copper, which will often mean an increase in price, particularly if supply cannot meet the required level.
Alternative metals can also impact the price of copper. After all, if the copper price becomes too high, it may be sensible to choose cheaper materials. In turn, this may have the effect of lowering demand and cause price to fall again. When copper was at a high point in the mid-2000s, aluminium was often used instead, for example in automobiles and for wiring procedures.
Trade copper on MT4
With City Index you can trade copper on MetaTrader 4 (MT4). This is an electronic trading platform that offers integrated insights and account management features, enabling traders to access Reuters news and City Index research for the latest updates that may move the market. The platform also offers free EA hosting capabilities and web and mobile trading support.
How to trade copper on City Index
Trade copper with City Index by following these simple steps and kickstart your market experience today.
Open a copper trading account
Open your copper trading account by filling out our online form and be ready to trade copper futures within minutes. Or if you like, you can first prepare for real money trading by opening a demo account and applying your strategy risk-free.
Plan a strategy and identifying an opportunity
It’s now time to plan a strategy and identify a trading opportunity. You may want to use a technical approach, a fundamental approach, or a mixture of both, in order to be fully informed on copper’s potential price moves. Use City Index trading news and market analysis section to keep abreast of the latest information that may impact the copper price.
How to start trading
Opening and closing a position is easy once you have your strategy and opportunity planned out. For a futures contract you will need to decide on the quantity of the commodity to buy or sell and the date at which to take delivery. The futures contract will have an expiry date, at which point you can decide to continue to hold your position, or settle in cash.
For a spot contract, simply choose the number of contracts you would like to trade and decide, based on your strategy and analysis, whether to go long or short. You can exit your trade when you see fit, based on fundamental factors, technical patterns and indicators, or a combination.
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.