Copper Tries To Win Gold Among Commodities

For all the talk about slumping commodities prices against the backdrop of a weaker dollar, there is copper. One of the most widely watched commodities is surging this year. After climbing about 2 percent on above-average volume on Thursday, the iPath Bloomberg Copper Subindex Total Return ETN JJC is up more than 21 percent year to date, good for one of the best performances among commodities exchange-traded products.

With copper and JCC resting at multi-year highs, data points suggest traders are increasingly bullish on the red metal and some copper-related equities.

“Investors are throwing cash into copper ETFs, while aggressively trimming their bearish bets on global copper producers,” said Markit in a note out Thursday. “Copper ETFs are gathering assets at three times the pace of the ETF industry. Average shorting activity in global copper stocks 75% lower than in Q1 2016.”

Making The Copper Call

Copper is one of the most widely watched commodities in the world because it is seen as a harbinger of economic activity. That said, the red metal is not always the most accurate gauge of risk appetite. JJC has slumped over the past three years, badly lagging competing gold ETFs and the S&P 500 during that period. In fact, from 2011 through 2016, JJC outperformed the SPDR Gold Shares GLD, the largest gold ETF, in just two of those years.

With copper looking tempting for the first time in a while, investors are showing plenty of enthusiasm for the industrial metal.

“Investors are eager to grab a piece of this rally – the 33 global copper ETFs amassed more than $100m of inflows since the start of the year,” said Markit. “These inflows put copper ETFs on track to post their best year since copper’s last bull run in 2012.”

Another Way To Play

Equity investors looking to participate in the copper rally via ETFs have some options to consider as well. There is the Global X Copper Miners ETF COPX, which is displaying significant leverage to copper's recent upside. COPX is up more than 6 percent over the past week and nearly 30 percent year to date.

Then there is the iShares MSCI Chile Capped ETF ECH. Although the lone Chile ETF features several sector weights that top materials, Chile is still the largest copper-producing country in the world, explaining in the large part ECH's 27 percent year-to-date gain.

Putting ECH's year-to-date performance into context, the Chile ETF is trouncing its Brazil, Colombia and Peru counterparts.

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