Citi sees temporary post-US election rally for copper
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The news: Citi analysts believe a Trump win in the US presidential election may see a temporary copper rally, similar to 2016.
The numbers: Citi analysed copper returns on and post-US election day and found the base metal has rallied on election day nine out of 10 prior cycles. The analysts expect copper could rally temporarily to USD10,000 ($15,186.95) per tonne over the coming week.
Three-month copper futures on the London Metal Exchange currently trade USD9,570.50.
The context: The analysts expect copper to rally on the back of easing in major consumer China as well as by the Federal Reserve, as well as a broader equity risk-on, should Trump win.
The metal price could also rally on a reduction in tariff fears, should rival Kamala Harris win.
They pointed out that a rally is only likely to be temporary in case of a Trump win, given that copper prices and positioning are much higher now than they were in 2016, and also the fact that Trump’s expected trade tariffs are eventually bearish for metals.
What they said: “Indeed, a Trump win scenario is eventually deflationary and negative for global growth via tariffs and bearish for metals demand, something borne out by 2018/19, and this will likely mean any rally is short lived this time around,” they said in a note.
The source: Citi research
