Invest in Copper
Copper is a base material. Its price reflects economic and geopolitical developments and the supply-demand dynamic. The supply-demand dynamic that shapes the price of base materials is particularly solid in the case of copper. Copper is the third most-used base metal, behind iron and aluminum.
Some factors that impact the price of copper are:
- Economic fluctuations
- Worker strikes
- Environmental considerations
- Global pandemics
- Investment trends in mining
Economic recoveries raise the demand for copper and with it, its price. The COVID-19 pandemic had a considerable impact on mining investments. With demand dropping, mines closed, and those that remained open avoided investments in new technologies and expansion. The result is lagging production, unable to keep up with the demand the economic recovery has created.
How Can You Invest in Copper?
Compared to gold, copper is cheap. Thus, the physical possession of this base metal is not as practical as that of gold. Investors can buy copper bullions, bars, and coins, but they have to ensure adequate storage as copper can take up a lot of space.
Copper futures require trading skills and know-how. Futures require investors to sell or buy a certain amount of copper at a set date, for a specified price. Trading copper through futures does not involve physical ownership of the asset.
Copper stocks represent a straightforward option for investors. And due to the unfolding economic recovery, they have outperformed the broader commodities market by a considerable margin.
The best-performing copper stocks are mining stocks.
- Turquoise Hill Resources Ltd. is a Canadian mine active in exploration and mining in Australia and Asia.
- Ero Copper Corp. is also a Canadian mining operation with its activity focused on Brazil.
- Copper Mountain Mining Corp. is a well-performing mineral rights company involved in copper mining. Copper Mountain is based in Canada as well.
Copper ETFs present investors with different opportunities than futures and stocks. ETFs may be leveraged and thus riskier. They allow investors with higher risk appetites to invest in a relatively conservative and stable asset. ETFs can offer exposure to the copper price, mining stocks, and futures. They also offer some diversification within the copper industry.
Copper mutual funds are another option for investors. These funds provide exposure to a selection of mining stocks.
Options are even further removed from direct exposure to the copper price. They can be riskier than some of the other investment methods.
Is Copper a Good Long-term Investment?
Mining is not an environmentally friendly activity. As such, it is not suited as a sustainable investment vehicle.
Commodities like copper can add diversity to a portfolio. They are highly volatile, however. Therefore, healthy exposure should not exceed five percent of a portfolio.