Commodity Radar: Why copper may be the most undervalued strategic metal and poised for a major rally?
Copper prices in domestic markets rose nearly 1% to hit the day’s high of Rs 1,089.20 per kg on Wednesday, taking cues from the international rates that rose in anticipation of a 25 bps rate cut by the US Federal Reserve.
The rate-setting panel – the Federal Open Market Committee (FOMC) – begins its two-day meeting today to decide on its final policy of the year. The decision will come on Thursday, when the Central Bank is expected to raise the policy rate by 25 bps.
The red metal contracts were trading at $5.365, gaining by $0.045 or 0.85% on the COMEX around 9:40 am India time (10:10 PM CT).
Ajit Mishra, Senior Vice President – Research at Religare Broking, said that copper’s clout as a strategically important metal is growing quite swiftly and yet it remains the most undervalued asset in global markets today, considering the widening demand and supply gap.
“The world is confronting a supply squeeze just as structural demand indicates an aggressive acceleration. The planned Chinese smelter cuts, the higher contract premiums from Chilean giant Codelco and medium-term weakness in the dollar continue adding to the positive tone. It will not be wrong to state that copper may turn out to be the next “gold” in months to come,” Mishra said.
Technical view
MCX copper witnessed an impressive rally of roughly 5.5% from the previous week, confirming strong momentum and healthy underlying demand, Mishra said. The trend structure remains firmly bullish on the weekly chart and the price action suggests the potential to extend further towards the projected upside target of Rs 1,155-1,165 in the coming weeks.
Trading strategy
In this bullish market, temporary corrections are a normal part of trend development, and any pullback near Rs 1,073 and Rs 1,066 shall provide important levels for fresh accumulation, Mishra said. For the next 3 to 5 sessions, an upside move shall be towards the Rs 1,100 level if closing is above the 1083 mark, he added.
(Disclaimer: The recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times.)