Gold has long been seen as a successful investment, but it has its disadvantages. Copper appears to be an investment that gives similar returns as gold.
Since the beginning of the pandemic, copper prices have skyrocketed, reaching a huge value of $10,000 per metric ton.
China’s efforts to curb the existing commodities’ boom caused prices to vary, giving investors a chance to trade a commodity whose demand will increase in the future.
Why is Demand for Copper Increasing?
Engineers and construction workers prefer copper over other commodities like gold. It is hard, flexible, and excellent heat and electrical conductor.
Copper is present in equipment, residential systems of electricity, pipes, and utensils.
The use of copper is so high in the world that a nickname is given to it known as “Dr. Copper” due to the ability to assess economic well-being. As the recovery of the pandemic has begun, copper’s price has re-entered the picture.
Several important initiatives and developments are expected to drive demand for this metal, in addition to the recovery of the global economy.
Reason for Demand Expected to Increase Further
In all the building initiatives by the US as it moves on with efforts to restore decrepit roads, bridges, terminals, and transport networks, copper will be the main part.
Copper’s involvement in the transition to electric automobiles and renewable energy is excellent news for Canada and its investors. Electric automobiles require double or four times higher copper than gasoline ones.
Copper’s antibacterial qualities may be beneficial for high-touch areas in medical centers fighting COVID-19.
Copper has risen 30% this year, according to BNN Bloomberg commodities analyst Andrew Bell, trading at the level close to its high record of 2011. Its price plummeted during the global crisis in March 2020 but has since returned to sell at approximately $4 a pound, having doubled in price.
Most of the increases occurred in the first quarter when the demand for goods and services recovered. Copper’s industrial relevance will ensure that its price will never go to zero.
Both a constriction of supply and an increase in demand is responsible for copper’s current price increase. Due to the pandemic, copper mines were closed for a portion of last year.
How Does One Deal with Copper?
Investing in copper has a few alternatives, some more difficult than others:
1. Bullion
Investors might simply buy gold coins or pieces to keep and sell later. Storage capacity will be a problem if you want to invest a lot of money.
2. ETFs
Commodity ETFs allow investors to acquire exposure to commodities without owning them. Some commodity ETFs focus on a particular commodity, whereas others provide wider access.
Invesco DB Commodity Index Tracking Fund, for instance, monitors 14 commodities, including copper. ETFs offer modest management costs, and purchasing them via a no-commission trading app saves much more.
3. Stocks
Alternatively, you might invest in a single copper mining firm. Consider the firm’s financial results, management group, and longer development forecasts when comparing share price to copper. Through ETFs, stocks are easily accessible via investment applications.
4. Futures
Traders can utilize futures contracts to predict a commodity’s price movement. In the future, you commit to purchase or sell a commodity at a specific price and date in the future.
Because most commodity prices are volatile, inexperienced investors avoid trading copper futures on platforms like the COMEX and LME.
Potential Risks
Investment in copper might not be suitable for everyone. Although the future trends show an increase in prices, analysts do not believe that prices would grow in a straight line. Copper is prone to large price fluctuations.
Aside from that, commodity prices are significantly more unstable than stock markets. Therefore, this serves as a risk for investors planning to invest all their money in copper.
Around half the world’s copper is mined in Chile, Peru, and China, with Chile accounting for more than a quarter. A large influence can be had by government policies, labor conflicts, and other types of local disturbances.
Suppose an investor is not prepared to invest completely in bullion, ETFs, or futures contracts. In that case, they can invest in copper by using an app that converts it into a diversified investment gold.