Welcome to illuminati silver, we tell you
the truth about silver. Today is Monday 18th June 2018 and we are
discussing the prospects for Copper and to assess whether it presents an investment opportunity
or not. Copper prices had a rocky start to the year,
declining more than 6% in the first three months of 2018. Increasing geopolitical concerns,
rising warehouse inventories and a weaker Chinese demand put pressure on prices.
Despite this, some analysts remain cautiously optimistic about its future and expect prices
to pick up in the next few months. Well Before we examine the prospects lets
just take a brief look at its more recent and not so recent history.
Firstly we ask the question ‘what is copper?’ Copper is the 29th element on the periodic
table and is a transition metal. It has an atomic number of 29 and atomic weight of 63.55
amu (atomic mass units). This shiny, soft and highly malleable metal has a number of
uses and has also been recognised as important to one’s physical health.
According to the Royal Society of Chemistry, copper, which means ‘from the island of
Cyprus,’ received its name based on the large amount of copper the Roman Empire acquired
from Cyprus. While the Roman Empire is most famously known for using copper in cookware
and coinage, the Dartmouth Toxic Metals Superfund Research Program states that the ancient Sumerians
and Chaldeans are believed to be some of the first people to make wide use of copper. Their
work introduced copper mining into ancient Egyptian society, where copper was used for
everything from tools to mirrors. Due to its soft nature, it is most often used
as an alloy which is a material comprised of a metal and a non-metal or two metals.
Alloys are typically stronger than single metal materials. Two common copper alloys
are bronze and brass. Bronze is a mixture of copper and tin, while brass is a mixture
of copper and zinc and most popularly used in instruments, including brass instruments.
Copper is also an excellent conductor of electricity, which is why it is often used in electrical
wiring. Copper is also known as a coinage metal. Its
popularity was based upon its resistance to corrosion from air and water. According to
the United States Mint, the penny was made from copper or a copper alloy up until 1982.
Since then, pennies have been made from 97.5% zinc and plated with copper due to its high
cost. Outside of coins, instruments and jewellery, copper is also used to make water pipes and
fungicides. Biologically Copper aids in the formation
of red blood cells, promotes healthy connective tissues and supports the immune system. It
is also an important component of many proteins and enzymes in the human body. An enzyme is
a biological molecule that helps to speed up chemical reactions in the body. It can
also be called a biological catalyst. In its purest form, copper is relatively soft,
and is malleable and ductile, meaning that it can be shaped or molded without breaking;
for example, hammered flat into sheets or drawn out into wires. Copper is resistant
to corrosion and is a good conductor of heat and electricity (second only to silver). Because
it is an element, copper can be perpetually recycled, without losing its properties.
Copper deposits were formed by the action of hot waters, commonly associated with volcanism
but also with sediments, and can be found around the world on every continent. Copper
can be found in the earth’s crust as pure native copper, but mostly occurs in combination
with other elements. Considered more of a tertiary commodity in
comparison to the shinier appeal of gold and silver, copper is often the third choice for
metal investors during uncertain economic periods. Today, copper is the third-most-used
metal in the world and plays a pivotal role in all major economies and in the developing
world. We shall now proceed to some basic copper
facts for investors looking to get into the market.
Construction is the largest application for copper worldwide. It is estimated that 40
percent of all copper is used by the construction industry. A home can contain on average 439
pounds of copper in wiring, pipes and appliances, while a car can contain 50 pounds of copper
in its motor, connectors and brakes. Because homes are so reliant on the semi-precious
metal, copper prices are tied to the health of housing markets. The second-largest market
for copper is the electrical and electronics space due to the metal’s excellent conductivity.
This arena now includes electric vehicles. In terms of volume, Asia has dominated copper
consumption for years; estimates suggest nearly 60 percent of all copper is used in this region.
Today, China is still responsible for over 40 percent of global copper demand, with the
US and EU following as the next most prominent buyers of the metal. With an expanding urban
population, India is also worth noting as a major copper consumer.
Chile is the world’s largest copper producer, producing more than double the amount of the
next highest producer, Peru. So lets now take a look at how the copper
price is derived: The price of copper is set by the free market.
Producers, suppliers and customers balance extraction, production and distribution costs
with demand. Two common exchanges where copper is traded are the London Metal Exchange and
the COMEX. Copper is heavily consumed, but it is also
heavily traded, which can lead to price volatility as large orders come in and out of the market.
As with many commodities, copper is also traded on the futures market, which gives investors
and consumers the opportunity to hedge against price changes. Notwithstanding this it also
of course as we all know this also gives rise to speculation and as some may say gambling.
For investors looking to enter the copper market, there are a number of options available:
Purchasing Physical copper: the time to obtain physical copper from pennies has long since
passed, but there are still options for investors to own physical copper or copper bullion through
bars or collectible coins. While storing these large materials can prove challenging, owning
physical copper might be the cheapest option for investors.
Stocks: To access copper prices more directly, investors can purchase shares of companies
engaged in mining the metal. These stocks demonstrate a strong correlation to spot prices.
ETFs: Alternatively, investors have the option of accessing the copper market indirectly
by looking at exchange-traded funds focused on the red metal, or on companies that mine
the metal. Futures: As mentioned, copper futures are
a popular way to hedge risk while getting exposure to the metal. There are a few exchanges
where trading copper futures is possible, including the London Metal Exchange.
So Is copper a good investment opportunity? A predicted 7.5-percent drop in demand from
China has raised concerns about the copper price, and that has hurt the stock valuations
of many companies in the copper-mining and exploration sector. But as the developing
world continues to advance and people migrate to cities, demand from the construction and
electronics sectors will expand and new projects will be required to meet that demand.
Investors need to decide if they believe that this new demand is enough to outweigh the
projected fall in consumption from China. Some market watchers are incredibly optimistic
about the future, predicting the red metal could hit $7 to $10 per pound during the current
cycle. In the first quarter of the year, copper prices
performed in a downtrend, declining more than 6 percent to end March at US $6,683 per tonne.
The copper price reached its quarterly peak at the beginning of January when it traded
at US$7,202 a tonne, supported by a weaker US dollar and a strong demand outlook from
China. Copper’s lowest price in Q1 came in March,
when it fell to US$6,499 per tonne. Copper prices pulled back as the US dollar rebounded
and warehouse inventories surged. On the supply side
Last year, all eyes were on copper mine disruptions. Supply stoppages at the top two copper mines,
BHP Billiton’s Escondida and Freeport-McMoRan’s Grasberg, are estimated to have brought global
2017 copper output down by 5 to 7 percent. In 2018, there will be several labour negotiations
as well, but analysts believe mine supply will grow.
Karen Norton, GFMS Thomson Reuters base metals analyst said “Having been more or less static
last year, copper mine production is seen growing by 2.5-3 percent this year, which
is expected to help facilitate an increase of similar magnitude in refined output,”.
In fact her organisation forecasts a surplus of 100,000 tonnes this year. Demand forecast
In terms of demand, all eyes are on China, the world’s top consumer, as the main factor
driving copper prices. According to Focus Economics, signs of softer
activity have emerged in the Asian country. In fact, the Chinese manufacturing PMI fell
to an over one-year low in February. Aside from expected improvement in the United
States, the world’s second biggest consumer, emerging nations such as Brazil and India
will have a greater positive influence. Meanwhile, demand in India is also expected
to increase, despite being offset last year due to demonetization measures which affected
construction activity. What’s ahead?
There are several factors copper-focused investors should keep an eye on.
• Investors should pay attention to trade war concerns that might spill over and curtail
global economic growth. • Other geopolitical factors, such as the
escalation or otherwise of hostilities between Russia, the United States and other western
nations could also impact the market. • Other factors to watch are the US dollar
and US politics, China’s credit and its reform of the financial sector.
“Looking beyond 2018, prices look set to trend upwards, on greater demand for infrastructure,
electric vehicles and renewable energy,” Focus Economics analysts said.
Market watchers polled recently by the firm gave mixed copper price predictions for the
second quarter of 2018. Looking ahead to the next few months, they estimate that the average
copper price for Q2 2018 will be US$6,825 per tonne.
The most bullish forecast for the quarter comes from Pezco, which is calling for a price
of US$7,415; meanwhile, E2 Economia is the most bearish with a forecast of US$5,836.
We should compare these figures however looking at the last 5 years where copper stood in
2013 at just over $3.50 per pound or $8,000 per metric tonne, falling to $2 per pound
or $4,500 per metric tonne in 2015 and today standing a little over $3 per pound or $7,135
per metric tonne. Our view obviously with the benefit of hindsight
the time to buy was in 2015. With supply increasing and current prices resting near to the top
of the highest forecasts for the year, we would not ourselves be too keen to invest
right now. That said, the demand for copper will undoubtedly rise, save a world economic
recession and it certainly appears that prices at or around $2.50 per pound or below $6,000
per tonne are very attractive indeed and certainly would prompt us to speculate in this market.
Whether we will get there or not is uncertain but its certainly within the past 52 week’s
low for the price. We hope you have found this video interesting
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Disclaimer: Illuminati Silver owners come from a background
of Banking, International Wealth Management and Economics. Having now retired from these
worlds we are not qualified to give investment advice. Therefore, this and other productions
must not be deemed to be giving such advice and merely represent the personal views of