Seasonal watch | Copper enters its brightest seasonal phase

February: the best month for copper prices

After a challenging start to 2024 for copper prices, it’s worth noting that February heralds the onset of a favorable seasonal trend.

Historical data from the past two decades indicates that February is a month of notable positivity for copper prices.

During this month, copper typically records an average gain of 4.2%, with a 70% probability of price increases. In terms of both average gains and the likelihood of price appreciation, February stands out as the most promising month for copper. This suggests that the positive price momentum seen in January may continue.

Furthermore, analyzing the data over the past 20 years reveals that the first half of February is the most robust for copper prices, with an average gain of 2.4% during this period, as per our semi-monthly price data analysis.

Recent developments in China are also contributing to the postive outlook. China recently announced a bold move by reducing the reserve requirement ratio (RRR) by 50 basis points, effective from February 5. This injection of approximately one trillion yuan ($140.85 billion) into the banking system will significantly boost liquidity in the market.

Simultaneously, the United States has experienced an increase in liquidity due to the US Federal Reserve’s accommodating stance, driven by favorable progress on inflation.

The Fed’s preferred inflation indicator – the Personal Consumption Expenditures (PCE) – recently registered its lowest levels since March 2021.

This macroeconomic backdrop bodes well for industrial metals, including copper.

Short-covering rally likely

Given the current macroeconomic environment, it is likely that the positive seasonal patterns usually observed in the first half of February will come into play.

There is a strong possibility of a short-covering rally, with COMEX speculators continuing to persistently increase their net short positions on copper.

These speculators hold an excessively bearish view on the global economy, seemingly overlooking recent developments in the supply landscape and the projected deficit for 2024.

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