Copper Continues the Crash As Zambia Finds Record Deposits

Copper prices were in a massive rally from March to May, as renewable energy increases the need for copper, but the crash is just as ferocious. There was a major Copper deposit discovery in Zambia’s mines last week, worth millions of tons, which have helped accelerate the fall, but the decline had already started at the end of May, and Copper it doesn’t seem to be finding a bottom soon.

Market Dynamics and Copper Supply Factors

Goldman Sachs had projected an inevitable deficit path due to increasing strain on refined supply against strong end demand. However, Zambia’s copper reserves have alleviated some supply pressures. Last week, copper experienced a sharp decline, which market players attributed to negative Chinese economic statistics and rising stockpiles in most international warehouses, indicating sluggish demand.

Copper Chart Daily – The 100 SMA Was Broken Last Week

After dropping to $3.70 in February, the price of copper (HG) embarked on a strong bullish trend, gaining more than $1.50 over several months until late May. This 40% increase, peaking at $5.20, was largely driven by technological advancements such as automation, the transition to electric vehicles and renewable energy sources, and the rise of artificial intelligence. These developments have expanded the demand for copper wires used in energy conduction.

Bearish Reversal and Goldman Sachs Failed Forecast

However, a significant negative reversal occurred following two daily doji candlesticks at the peak. Two months ago, Goldman Sachs revised its commodity forecasts, raising its copper price estimate from $10,000/ton to $12,000/ton, anticipating a growing trend of copper market scarcity in 2024. Despite this bullish forecast, copper prices declined for about a month, finding support at the 100 daily SMA (green) at $4.40. In the first half of July, prices rebounded to $6.70, hitting the 50 daily SMA (yellow), which acted as resistance and confirmed the bearish bias of lower highs.

Impact of PBoC Policy Changes on Copper

The People’s Bank of China (PBoC) surprised markets by lowering rates on key benchmarks. Additionally, the recent revision to the PBoC policy framework suggests that more measures could be taken by Chinese officials to promote growth. These actions could help halt the fall in commodities and copper prices.

Outlook for the Copper Market

Overall, robust economies with steady global growth and rate cuts by major central banks should be supportive factors for the copper market. Further expansionary measures by Chinese authorities could provide an even greater boost to copper prices.