Commodity prices including those of metals have remained volatile over the last few years, with demand dwindling in spite of increased supply.
Over the last four months, the prices of Copper metal have fallen drastically, albeit with episodes of spikes and declines, which again underpins the current volatility in the commodity markets.
This gradual decline has affected the prices of the associated ETFs, and a good example is the Global X Copper Miners ETF (COPX), while has declined from a high of more than $11 per share the current level of about $3.30 per share. This represents more than 70 percent loss in value over a period of less than five months.
During the same time, prices of high-grade copper have fallen from a high of $3.50 to the current level of about $3.00 a pound, representing a decline of about 14.28 percent.
What is Really Behind Declining Copper Prices?
Statistics have shown that China, the world’s biggest consumer of copper has been one of the culprits; its economic slowdown has contributed to a huge decline in demand for the commodity, leading to a continuous decrease in copper prices over the last few years.
On Nov 17, Copper prices suffered yet another blow after Japan, the world’s fourth largest consumer of the copper metal reported a slowdown in its economy, which signaled a possible decline in demand for copper in the coming months.
Additionally, the global slowdown in economic growth continues to increase the uncertainties in the macro business environment, which in return affects commodity prices. Furthermore, the U.S dollar has been on the rise against major currencies in the foreign exchange market and this does not work out well for Copper prices, whose currency denomination is the U.S dollar.
For instance, the recent recovery in copper prices (albeit insignificant) is driven by the recent U.S economic data, which sparked rallies across all major indices in the U.S equities. However, a majority of the Western Nations along with sections of Asian economies continue to struggle for growth.
