COPPER
has attempted a rebound from technical oversold levels in recent days, following a 20% drawdown from its all time highs, thus officially entering a bear market. Is this an indication that investors have already priced in a global economic downturn and that the worst is now over?
Or are we merely experiencing a copper bear market rally, with further declines to come?
The previous days have acted as a relief rally in all assets that had declined in recent months. That's because interest rate fears cooled as inflation peaked. The market is beginning to believe that the Fed may not go all-in with rate rises and will thus need to release the brake to prevent more damage (a recession).
However, the most significant concerns associated with copper, particularly Covid-19 in China and the negative repercussions on global growth, have not dissipated.
If current geopolitical and economic challenges, such as Covid in China and the conflict in Ukraine, derail globalization efforts, copper prices may face further headwinds in the coming months as trade flows stall due to a drop in global consumer demand amid real income losses.
Copper prices exhibit an extraordinarily close link with South Korean exports ECONOMICS:KREXP — one of the world's most open economies and a gauge of the health of global trade flows.
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