Copper price tested back towards the $430.00 level yesterday, although buying was lacking just some $7.00 shy of the current yearly high. Gold also suffered a similar fate and dragged other metals lower as it failed to crack the technically important $1,800.00 level.
Still, things are looking up for the price copper, market chatter continues about a new commodity super cycle starting this year, inflationary pressure is on the rise, and the big one to watch on the fundamental front, which is proposed massive new infrastructure plan from President Biden.
The USA is in fact up to stimulus number five, with talks of the Biden Administrations’ new US Infrastructure Stimulus largely still in the pipeline. This will add billions if not trillions more to the $6 trillion dollars already thrown at the year-long coronavirus pandemic.
If you were worried about the purchasing power of the US dollar in 2019, then this could definitely boost precious metals, other assets as a store of wealth in the coming months.
In the latest FOMC minutes, the US central bank acknowledge that the rising trend toward higher longer-term yields observed in recent months had started to accelerate and that the Treasury Inflation-Protected Securities (TIPS) had risen considerably.
Fed Chair Powell is resolute that the rise in inflation will be transitory and as the year-on-year data drops the Spring 2020 figures, we will have a better idea of how transitory the inflation is.
Copper, and other precious metals with industrial and real-world usage have been surging lately. Tin is a clear example, and has been posting triple digit gains since last year.
Metals traders, and particularly copper traders, may be waiting for the new US infrastructure deal to be approved before the next big leg up in the metal takes place. Seasonality continues to be on copper’s side, with April and May historically strong months.
Sentiment towards copper is providing few clues right now. Some 59 percent of traders are bullish towards copper, which means that this is still on the borders of bullish, and not overly crowded.
We probably do need to see ultra-bearish sentiment towards the red metal return from the retail crowd before the next leg higher commences here.
Copper Short-term Technical Analysis
The four-hour time frame shows that an extremely large, inverted head and shoulders pattern will form if copper reaches the $437.00 level.
According to the overall size of the potential price pattern copper could rally towards the $500.00 benchmark level if a break does take play, and indeed if the pattern is ignited.
The recent lack of selling interest below the $400.00 level certainly bodes well for copper in the short-term, as does gold’s ongoing price recovery from $1,675.
Copper Medium-term Technical Analysis
The larger picture for copper prices continues to show a massive inverted head and shoulders pattern, which remains activated while the price trades above the $380.00 level.
According to the overall size of the bullish reversal pattern, copper prices could rise towards the $600.00 level over the medium to long-term.
I suspect that we will eventually see this pattern ignited and the price of copper will go parabolic and even take out the $500.00 level and go higher than many traders anticipate.