Copper futures climbed higher on Tuesday, reaching the highest levels since August of 2011. The price of copper, the world’s most important industrial metal, has more than doubled since the lows posted last March.
The boom in electric vehicle manufacture along with copper’s other electrical uses have sparked the interest of investors. Goldman Sachs recently raised its 12-month target to US$10,500/t.
Optimism over the rollout of the Covid-19 vaccine and a global economic recovery has also boosted copper along with other cyclical assets. Analysts expect rising demand for copper from the power and construction industries as economies begin to reopen.
Meanwhile, some investors have been buying commodities such as copper as a hedge against inflation. Bond yields tend to rise with inflation expectations. Earlier this week, the yield on the 10-year note rose to the highest level since February 2020.
Speaking before the Senate Banking Committee on Tuesday, Jerome Powell said that inflation and employment remain well below the Federal Reserve’s goals and that dovish monetary policy is likely to stay in place. He confirmed that the Fed is “committed to using our full range of tools to support the economy and to help ensure that the recovery from this difficult period will be as robust as possible.” He added that it will be “some time” before the Fed considers changing course.
While the outlook looks bright for copper, it may face headwinds if there is a hawkish shift in monetary policy in China. China is now the world’s largest consumer and producer of copper.