Funds buy into copper as trade war uncertainty lifts: Andy Home

LONDON, Jan 20 (Reuters) - New year, new trade deal.

The Phase 1 agreement signed by the United States and China may raise as many questions as it answers, but it does at least dispel some of the global trade uncertainty weighing on base metal prices.

It’s certainly been enough to buoy copper, which spent much of last year under selling pressure from funds looking for a metallic trade-war trade. London Metal Exchange copper last week hit a nine-month high of $6,343 per tonne.

The money men have been buying copper since the start of December and are now net long of the CME contract for the first time in nine months.

The same holds true in London, with only the Chinese winding down activity ahead of the Lunar New Year holidays.

It helps that the break-out of trade peace, however temporary, is coinciding with a pick-up in Chinese industrial activity.

It also helps that copper’s fundamental market narrative is relatively bullish, unlike those of other metals such as aluminium.


Funds have been holding a net long position on the CME copper contract since the beginning of this year. The last time they were collectively this bullish was back in April 2019.

Macro negativity then turned the money men collectively short of copper, the bearishness reaching extreme levels in August and September.

That started changing during December as the prospect of a trade deal loomed. Funds turned net long of copper around the middle of the month and have stayed so since then, last week to the tune of 6,906 contracts.

There has been some minor rebuild of shorts since the start of January, possibly because the copper price appeared to be losing upside momentum prior to the latest Commitments of Traders Report (COTR).

However, fluctuations in CME money manager short positions have been damped by the continued build in long positions. These reached 81,511 contracts last week, the biggest bull commitment since June 2018.

Something similar is happening in the London market.

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