Price of copper hits all-time high above $5.00

Key points

• Copper futures hit a new all-time high above $5.10/lb
• Growing demand for the industrial metal has bolstered global demand to new heights
• The 3-month correlation between copper and USD is -0.25
• The outlook for Copper is promising, but a cooling US economy could limit its upside

Copper opens the week above $5.10

Copper futures soared, hitting $5.10 per pound at the open on Sunday night and maintaining that high into Monday. This milestone represents new all-time highs for copper futures, indicative of strong market dynamics. This high is just the latest milestone in the surprising rally beginning in April, which hasn't looked back after surpassing $4.25.

How did the price of copper get so high?

Copper as an asset is distinctly different than precious metals like gold and silver because of its robust industrial uses. For this reason, variations in the price of copper can be seen as a barometer for global production and by extension, global economic health.

This surge in copper prices is largely driven by its crucial role in growing industries including electronic vehicles and AI chip manufacturing. This growing demand is particularly pronounced in China, whose economy is still regaining momentum in these key industries. For the time being, demand is outpacing new supply, furthering the rapid rise in futures prices.

Copper and US dollar are often negatively correlated

While copper and the US dollar generally have an inverse correlation, the relationship isn't as straightforward as with precious metals - making their relationship historically weaker. Copper's extensive use in goods means its price dynamics can be different. Nonetheless, since copper is priced in USD, any fluctuation in the value of the dollar impacts copper prices indirectly. The 3-month correlation between the US dollar and copper futures is currently -0.25.

Where can markets go from here?

Speculation around the copper market is highly forward-looking, with analysts focusing on future demands from electric vehicles (EVs) and AI technology, as well as corporate commitments to zero carbon emissions — settings where copper is essential. If the anticipated growth materializes, copper demand is expected to surpass supply. However, there remains skepticism about the feasibility of these ambitious goals. On a broader macroeconomic level, production in the US and Europe is decelerating as inflation eases, while China is just starting to pick up pace. A continued slowdown in major economies might reduce pressure on copper demand.

The strength of the US dollar is tied closely to America's relative economic performance, suggesting that its movements could be independent of the global copper market. Given China's significant role in copper demand, its economic activities are crucial to monitor. For insights into the economic ties between China and the dollar, traders should watch the AUD/USD pair, as Australia counts China as its largest export market.

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