Why and How to Trade Copper?

Early History of Copper

May people opt for copper trading in our temporary time. Copper has become a common commodity traded among investors in our contemporary world. However, tracing its origins reveals how this metal acquired its value and became a favored choice among traders.

Copper is the oldest metal known to humankind

Copper holds the distinction of being the oldest known metal to humanity. Its discovery dates back to 8700 BC in Iraq, and from that point onward, it became the main metal utilized by humankind. People employed copper for various applications for nearly 5,000 years before gradually incorporating the use of other metals into their practices.

Copper set the beginning of a new age for humanity

Copper marked the beginning of a new age for humanity. Around 3300 BC, people discovered that by mixing copper with tin, they could produce bronze. This marked the beginning of the age that historians refer to as the Bronze Age.

Copper gained more importance in modern times

Copper gained increasing importance in modern times. As humanity advanced and entered the industrial revolution, the significance of copper soared to even greater heights. It was more needed than ever for crafting machinery and other inventions. It is then that copper started to become a popular trading choice.

Copper Became Dr. Copper

As copper became widely used in diverse industries, ranging from construction to electronics and power infrastructure, it became the metal against which analysts could figure out the economic state of the area. The high demand for copper means that the country is economically well. It is no wonder that it held a “Ph.D. in economics” as it could predict the shirts in the global economy.

Factors that Affect the Prices of Copper

Before delving into copper trading, it is good to know the factors that affect its prices. Though one of the metals, copper is available in large quantities around the world. Therefore, the factors that affect the movement of its prices can be a bit different from those which affect the prices of precious metals like gold and silver.

-The growth of the global economy affects copper trading

As previously illustrated, higher demand for copper indicates that the economy is flourishing. The reason behind this is that increased demand signifies that a certain area is interested in spending money on infrastructure and other forms of improvements.

-The emerging markets

When a country is quickly developing, its demand for copper will be higher as it needs more housing and building materials. In such a scenario, the price of copper will soar. In contrast, the price will start to fall once those markets settle and are no longer in need of copper.

-Crisis in Copper-producing Companies has influence on trading copper

When countries that are known for producing copper are facing wars or natural disasters, or any other unfortunate events that can make accessing them difficult, the price of copper tends to rise.

Kinds of Copper Trading

–Physical trading

Physical copper trading is the buying and selling of the actual metal. The investor buys a certain quantity of metal and then sells it when the time is right. 

– Copper futures trading:

It is a contract through which the investor agrees on a price when trading copper to pay today for a quantity of metal that will be delivered at a set date in the future. 

-Trading Copper CFDs (Contracts for Difference):

With this form of contract, traders speculate on the movements of the price of copper without actually buying the underlying asset.  

-Trading Copper ETFs

When trading copper, investors can buy Exchange-Traded Funds (ETFs) that include bullion, futures, or a combination of both. 

-Copper Stocks

There is also an option to trade in the stock of companies that mine copper. Aside from the copper prices, investors should also take into consideration the type of company management and the profitability of the mines.

Famous Correlations between Copper and Other Assets

Some correlation with other assets can help traders speculate better on the price of copper when trading this metal such as:

–Negative Correlation with the US Dollar

Copper shares this characteristic with other metals. When the dollar’s price rises, the price of copper is expected to decline, and vice versa.

–Positive Correlation with Oil

Traders can utilize the oil price to forecast copper trading prices due to a robust positive correlation between these commodities. However, the growing influence of renewable energy resources could disrupt this positive correlation.

– Positive Correlation with the Chinese Yuan (CNY):

Because China is a major consumer of copper, the Yuan (CNY) can show a positive correlation with copper prices due to China’s influence on global copper demand.

Why Choose to Trade Copper

High demand

As the article previously emphasized, copper experiences high demand due to its extensive global utilization. This demand contributes to copper’s ability to sustain high prices, positioning it as a low-risk commodity that can enhance your overall portfolio, which makes it a good trading choice.

Trading Copper Help You Diversify your portfolio

Thanks to its low-risk nature, incorporating copper into your trading portfolio alongside other metals and assets can provide a safety net in case of losses.

Easier predictability

Because copper has many uses, it’s easier to predict how it will behave compared to metals when trading them.

Trading Copper and Risk Management

While trading copper offers numerous advantages for traders, the associated downsides or risks should not be disregarded. Primarily, both national and international events can significantly impact the value of copper, potentially resulting in heightened volatility. Consequently, trading larger quantities of copper shares can expose traders to more substantial losses. To mitigate the potential negative outcomes of such scenarios, investors must remain vigilant about recent market events and adapt their strategies accordingly.