3 Stocks To Gain From Copper Rally

Following two sluggish years, copper finally effected a late recovery in 2016. Optimism over President Trump’s $500 billion infrastructure plans drove the metal upward. Meanwhile, encouraging economic data from the second biggest economy and the largest copper consumer China have raised expectations of higher demand for the commodity, which in turn have led to an increase in prices. Additionally, continued workers’ strikes at major copper mines have also helped price escalation.

Meanwhile, in a widely expected move, the Fed raised key interest rates after its two-day policy meeting this week. However, the central bank’s cautious approach regarding the path of future rate hike this year weighed on the dollar, which in turn has also benefitted copper prices. Adding copper stocks to your portfolio could lead to lucrative gains at this point.

China’s Strong Economy to Boost Demand

According to the National Bureau of Statistics of China, the country’s industrial output advanced 6.3% year over year in January from the 6% increase in December. Steady growth in China’s steel industry contributed to this increase in industry output. Additionally, investment in fixed assets, including factories and buildings increased 8.9% year over year during the January–February period, much better than a rise of 8.1% in 2016. Retail sales also advanced 9.5% in the last two months.

With China being the world’s major buyer of copper, accounting for 46% of total consumption, strong industrial production and fixed asset investment data are likely to signal the nation’s demand for the red metal. The price of copper for May delivery rose roughly 0.8% to $5,865 a ton on the New York Mercantile Exchange on Wednesday, registering four straight sessions of gains. Copper prices also increased around 1% on the London Metal Exchange (LME) to $5,924.50 per ton, marking a rebound after falling to $5,652 a ton last week, which was its lowest level in the last two months.

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