Copper Futures

Copper is a popular commodity that investors trade in everyday. The main use of copper can be found in electrical, plumbing and other construction fields. The fact that the main use of copper can be found in construction projects poses interesting facts about how copper is traded on the market. Unlike gold and other precious metals, copper can be directly affected by certain world or economic events. While gold and silver seem to rise even faster during a recession, copper will most like go the other way. Why is this? Copper is governed by supply and demand like other precious metals are. The difference is what it is being used for. While precious metals reveal the true value of paper money and the state of the economy, copper futures will do the same but in a different way. Political unrest, strikes, shipping problems and slow construction all affect copper futures in a negative way. The easiest way to predict what copper futures will do is by looking at construction. The amount of houses and commercial buildings being built is directly tied to copper prices. Higher demands during higher construction times will drive copper futures up. Lower demands and slow economic times where there isn’t much building going on will lower the value of copper futures.

Investors who trade in copper futures keep their eyes on these factors. If there is a strike or a shipping problem within the copper industry, the investor may want to sell off their stocks before they drop. Other investors wait for opportunities like this to buy copper futures when they are at an all time low. China is now heavily impacting copper futures. They are one of the biggest users of copper and their growth isn’t going to slow down any time soon. Experienced investors are predicting that China will continue to grow and build, promoting higher demands in the market of copper futures.

Copper futures are more volatile than other precious metal markets. In 2008, copper dropped from roughly $4 a pound to a little over a $1 a pound. This dramatic drop happened during the months from July through December of 2008. Notice anything suspicious? During this time is when the banks were collapsing and economic troubles really took off. Construction was at a stand still and nothing was being built for fear of the economy dropping even more. This spiraling downfall rippled through all the major banks down to small construction business owners. Small construction businesses and even large construction firms were unable to qualify for loans during this time. No loans meant a halt in building. However, during this time, China began to see a spike in their economy. They began building more and more, creating a demand that eventually brought copper back up to almost $5 a pound at the end of 2010. A smart investor will look at these figures by checking out copper charts. It was obvious that in December 2008, when copper was at an all time low, that it was time to buy copper futures.

Those investors who bought copper futures have made a lucrative amount of profit up to now. Like with any commodity, taking heed to the current events that are taking place and unfolding throughout the world will help investors make intelligent decisions. Markets can be complex but understanding what events change prices can take all the complexities out of the equation. Experienced investors that keep an eye on world events through newspapers, magazines and the news media, hear the stories differently than everyone else does. When slow down in construction is being predicted, the investor will hear this as a sign that copper futures will drop. Any news about construction picking up, the investor will hear this as copper is going up. To be a good investor, all you have to do is listen.

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