LONDON: Funds have slashed their collective bullish bets on higher copper prices as the sizzling rally shows signs of stalling.
London Metal Exchange (LME) copper hit a near-decade high of $9,617 per tonne last month, at which stage the price had more than doubled from its March 2020 lows.
However, copper has subsequently churned sideways in often volatile and low-liquidity conditions, LME three-month metal currently trading around the $9,100 level.
Many of those who got in early on the rally have evidently decided to book some profits, with fund long positioning on the CME copper contract falling sharply this month.
Investors have been drawn to other markets, particularly a resurgent energy sector, but the outflow of funds also reflects wariness about the potential for a major correction as the market’s short-term optics start to look a bit less bullish.
As of last Tuesday money managers were collectively net long of the CME copper contract to the tune of 44,570 contracts.
The collective bull bet has almost halved in the space of a month from a Feb. 14 high of 87,671 contracts and is now back at levels last seen in July last year, when the copper rally was in its infancy.
The shift in money manager positioning has been mainly down to a reduction in outright long positions from February’s three-year high of 118,463 contracts to a current 78,448.
Outright short positions have edged only marginally higher over the same time-frame, suggesting few are yet bold enough to take a fully contrarian stance to copper’s bull narrative.
The CME contract is heavily populated with black-box funds tracking price momentum, so it’s no surprise to see some exiting as the price action becomes more ambiguous.
But the scale of the reduction suggests that technical signals are not the only driver.
So too with LME broker Marex Spectron’s assessment that speculative length in the LME contract has collapsed from 62% of open interest at the end of February to around 36%.
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