Commonly believed to be the first metal utilised by humans thousands of years ago, copper is a sought-after commodity. Used in a wide range of industries, copper is an excellent conductor of heat and electricity – yet it's also pliable, malleable, and ductile. With these stellar properties, it's no wonder this versatile metal is a popular investment.
If you're looking to diversify your portfolio with 'poor man's gold', sign up for a Tradu trading account today.
Copper commodity trading is quite simply an agreement whereby traders agree to buy or sell copper on a pre-agreed future date.
In a bygone era, copper trading involved the physical delivery of copper bars on a set date in the future. However, nowadays, commodities like copper can be cashed in online, without ever needing to own the underlying asset.
Copper has played an intrinsic role in human advancement for thousands of years – from primitive tool making to electrical wiring. And it's showing no signs of letting up.
With so many industrial uses, copper is a high-demand metal. As the demand for copper outweighs the supply (with the global mining market struggling to keep up), this makes copper the ideal commodity to trade.
Due to consistently high demand, copper is considered a 'low risk' investment. This is because copper is the jack-of-all-trades in the precious metals world, so can be used to diversify your portfolio. Unlike gold and silver (which are used to store wealth), copper doesn't feel the effects of speculative price movements as heavily.
What types of copper can you trade?
When referring to copper trading, there are two types of copper to trade:
1. High-grade copper – These futures are from the COMEX division of the New York Mercantile Exchange. COMEX copper is priced in cents per pound and is normally traded as futures. But you can also trade this type of copper on the spot.
2. Copper – These futures are traded on the London Metal Exchange (LME). Much like high-grade copper, this copper can be traded as futures or on the spot. LME copper is quoted in US dollars and sold in lots of 25 tonnes. It's priced three months in advance.
Please note that with Tradu you can only trade one type of copper CFD, which is based on the COMEX price.
There are many benefits to trading copper. Some of which include:
There are also drawbacks to trading Copper. Some of which include:
Unlike precious metals like silver and gold, copper is available in greater quantities. This makes it cheaper and – normally – not valuable enough to be used as currency. But that doesn't mean it can't be traded.
As receiving the physical ownership of copper would be logistically difficult, copper is normally traded using futures, options spot prices, CFDs, and shares. Please note you cannot trade futures or options with Tradu; their inclusion here is for informational purposes only.
CFDs (contracts for difference) involve speculating on the market price of copper using futures and options.
CFDs are agreements to exchange the difference in the price of copper from the date the position was opened until the close.
CFDs are classed as derivatives, which means that you can go long or short. If you think the value of copper will increase, you go long. Or, if you think the price of copper will fall, you can go short.
How much you make – or lose – is decided by how far the market moves. If the market moves in your favour, the amount of money you make depends on how many points the market moves toward your position. If it moves in the other direction, you'll lose.
You can use leverage for CFDs. This means you only need to put down a small deposit to get exposure to the market. Although this means your profits can be higher, it also amplifies your losses. So, you must have appropriate risk management measures in place.
Copper commodity trading markets are normally open 24/7. But there are trading breaks to be aware of. Copper trading hours are as follows:
Copper is one of the most versatile metals, making it a staple component in many industries. From coins to crude oil and electronics, copper's applications are vast.
Although demand is consistently high for this red, tubular metal, some external factors determine the price of copper:
As copper is crucial to infrastructure, emerging markets help to drive copper prices upwards. For example, fast-growing countries such as China and India are amassing large amounts of wealth as their economies boom.
This means infrastructure has to keep up to provide enough housing and transportation in these areas. Copper is therefore reliant on these emerging economies and should their rise slow, copper prices may plummet.
Copper is used for everything from electrical wiring to insulation, roofing, and even plumbing. So, if the US housing market is buoyant, copper prices are too.
Factors that impact the US housing demand can also play a role in determining copper prices, so it's important to keep an eye on things like mortgage rates, GDP, and demographics to accurately predict the copper market.
Like many other commodities, the copper trade is largely dependent on political and environmental issues. Nationalisation issues, miners' strikes, and supply chain disruption can impact copper prices. For example, when the mining industry was nationalised in Bolivia in 2007, copper prices skyrocketed as the demand outweighed the supply.
Similarly, natural disasters such as earthquakes and/or landslides can slow down the rate at which copper can be mined. This decrease in supply drives copper prices higher.
If you're considering copper trading, it's important to keep a close eye on geopolitical news for clues as to where the copper market is heading.
As with any commodity, substitution presents a real risk to any investments. As prices of copper increase, consumers seek out cheaper alternatives.
Unfortunately for investors, cheaper alternatives to copper are now widely available. For example, aluminium is now used as a substitute for copper in electrical equipment and power cables. There are also some instances whereby nickel, lead, and iron can be used as copper alternatives.
Looking to take the plunge and start trading? You can do so in just a few simple steps with Tradu.
If you've enjoyed learning about copper commodity trading, be sure to check out our other commodity trading guides.