What is copper trading and how to understand copper prices?

Discover the history of copper trading, and find out how to trade the copper price today.

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Copper is a metal of diverse utility – with application in industries ranging from agriculture to construction – but it is also a commonly-traded commodity by market speculators. Discover the history of copper trading, learn more about the supply and demand factors that move its price, and find out how to trade it today with City Index.

History of copper trading

The history of copper trading goes back thousands of years. Bronze Age Mesopotamians were probably the first to familiarise themselves with the commodity, and early societies would use copper as a bartering tool, measuring its value against items such as food and livestock.

While it’s been used since Roman times for coins, together with gold and silver, copper had a low inherent value due to its abundance. This means that, unlike gold, it has never carried the status of a monetary standard.

Today, copper is used in a variety of industrial processes, with its pliability and strong electrical and heat conductivity making it useful across a diverse range of sectors. Supply and demand factors in relation to its industrial use have been a strong influence on the copper price over the years. The commodities boom of the 2000s saw copper rise sharply in price, with its value almost quadrupling from 2004 to 2006.

History of copper price

Take a look at the recent history of copper price, documenting the fundamental drivers that impacted the metal’s price movements since 2011.

History of copper price

Why trade copper with City Index?

Trading copper futures with City Index means that you can benefit from competitive pricing, reliable trade execution and innovative trading solutions on a trusted platform.

Copper’s price movements are closely linked with economic activity, so if you like to follow developing markets, you may be interested in the copper price movements caused by patterns of infrastructure development worldwide.

Discover more reasons to trade with City Index.

Types of copper assets

There are various types of copper assets available for trading. The first distinction is between COMEX and LME, the markets on which the metal can be traded. COMEX is part of the New York Mercantile Exchange (NYMEX), where copper is priced per pound, while LME copper refers to copper traded on the London Metal Exchange, which is priced per tonne.   

Futures are based on the price of the underlying commodity and are traded by defining a price for buying or selling on a future date. Copper futures are popular instruments to trade which means liquidity is generally good, so it will be potentially easier to buy and sell the contracts you’re interested in.

Futures contracts typically use leverage, traders can increase their exposure to the market by paying less than the full value of the contract, which increases potential gains but also increases risk accordingly.

Where permitted, you can also trade copper using its spot price, which is based on the price of the asset at the present time. Also, traders who prefer shares can trade companies with exposure to the copper market such as mining companies.

What affects the copper price?

There are a variety of fundamental factors that affect the copper price, and these should be researched before trading the metal. Knowing the likely drivers of the value of the metal will give traders more information with which to prepare their positions. These factors include the state of the economy, supply problems, the housing market, and alternative metals. 

Economic prosperity

During periods of economic growth, development in infrastructure may increase, causing a high demand for copper and therefore pushing up its price. If this high demand for the industrial metal is met with oversupply, the price may fall again. Conversely, during periods of economic decline, projects that require large amounts of copper may stall, pushing down demand for the metal and hitting its price.

Markets such as China, India and Brazil that have seen strong growth have caused a high demand for copper in recent years.

Supply problems

Supply problems can affect the copper price in a variety of ways. Natural disasters such as earthquakes, human resource issues such as worker strikes, and political influences such as trade wars can affect mining output and supply chains, and cause prices to rise.

Housing markets

Since copper is a key material in the construction industry, particularly for use in plumbing and wiring, the health of housing markets can be a strong driver of copper prices. If there is a housing boom in a particular territory, there may be a considerable demand for copper, which will often mean an increase in price, particularly if supply cannot meet the required level. 

Alternative metals

Alternative metals can also impact the price of copper. After all, if the copper price becomes too high, it may be sensible to choose cheaper materials. In turn, this may have the effect of lowering demand and cause price to fall again. When copper was at a high point in the mid-2000s, aluminium was often used instead, for example in automobiles and for wiring procedures.

Trade copper on MT4

With City Index you can trade copper on MetaTrader 4 (MT4). This is an electronic trading platform that offers integrated insights and account management features, enabling traders to access Reuters news and City Index research for the latest updates that may move the market. The platform also offers free EA hosting capabilities and web and mobile trading support.

How to trade copper on City Index

Trade copper with City Index by following these simple steps and kickstart your market experience today.

Open a copper trading account

Open your copper trading account by filling out our online form and be ready to trade copper futures within minutes. Or if you like, you can first prepare for real money trading by opening a demo account and applying your strategy risk-free.

Plan a strategy and identifying an opportunity

It’s now time to plan a strategy and identify a trading opportunity. You may want to use a technical approach, a fundamental approach, or a mixture of both, in order to be fully informed on copper’s potential price moves. Use City Index trading news and market analysis section to keep abreast of the latest information that may impact the copper price.

How to start trading

Opening and closing a position is easy once you have your strategy and opportunity planned out. For a futures contract you will need to decide on the quantity of the commodity to buy or sell and the date at which to take delivery. The futures contract will have an expiry date, at which point you can decide to continue to hold your position, or settle in cash.

For a spot contract, simply choose the number of contracts you would like to trade and decide, based on your strategy and analysis, whether to go long or short. You can exit your trade when you see fit, based on fundamental factors, technical patterns and indicators, or a combination.

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