have been chronically weak performers for much of 2013. The
combination of a strong dollar, sluggish manufacturing figures,
and a slumping China have pushed products like copper sharply
lower since the start of the year.
However, Friday marked a huge reversal for the space, as many
metals in the segment saw banner days. In fact, the space led the
commodity world to close out the week, with gains of nearly 6.6%
seen in the spot copper market.
Behind the Copper Price Surge
The story of copper's turnaround in the past few hours was
really a global phenomenon. First, the increase in copper started
in the Asian markets as investors scooped up the red metal from
Then in London, investors saw that there have been big
drawdowns in supplies as of late, including a massive 7,425
metric ton drawdown. Inventories still stand at 608,700 tons,
according to Forbes
, but this was the second biggest drawdown in the past four years
for the base metal (see
Is the Copper ETF Back on Track?
The bullish short-term trend continued for copper in the U.S.
as the robust jobs report and the resulting equity surge caused
many to buy the metal. Short covering was probably also at play
for the product, adding to the metal's impressive surge to close
out the week.
This news was obviously well received by the various base
metal and copper ETFs on the market, as these all rose by several
percentage points on the session, including the following
PowerShares DB Base Metal Fund (
This ETF roared higher by close to 4.4% on the day on volume
that was surprisingly below the average. Copper takes up about
35% of the assets in the ETF, while aluminum and zinc round out
the rest of the portfolio (see
Time to Sell This Commodity ETF?
iPath Dow Jones UBS industrial Metals ETN (
This product also had a solid session, gaining over 4.5% on
higher-than-normal volume. The ETN holds four commodities in its
basket though-copper, aluminum, nickel and zinc-though it
allocates a bigger chunk to copper at 42% of the portfolio.
PowerShares DB Base Metals Double Long ETN (
For a truly volatile play on the base metal market, investors
could look to BDD and its 200% leveraged exposure. The product
has a similar holding profile to DBB (though less in zinc), and
was up close to 8.1% in Friday trading.
iPath Dow Jones UBS Copper ETN (
And finally, the most popular pure copper product on the
market saw its price surge by nearly 6.7% on the day. Volume was
also quite good for this ETN, as more than 144,000 shares changed
hands, roughly double the normal level.
Copper Mining ETFs
Meanwhile from an equity perspective, the trading was also
quite good. Currently there are two copper mining ETFs on the
from Global X and
from First Trust (see
Copper Mining ETFs Head-to-Head
Both of these saw volume that was higher than normal, and
gains approaching what investors saw in the commodity market.
However, it is important to note that gains were less in the
equity world today, though these have also been worse performers
in the YTD time frame as well.
Today was a perfect storm in the copper ETF market, as gains
were pretty easy to come by. Not only did the jobs report result
in a bullish trend, but investors also saw international markets
pile on as well.
Still, even with this huge turnaround,
copper ETF investing has been pretty terrible
throughout 2013. So more than a few sessions like today's will be
needed to boost copper back to prominence and into the green for
the calendar year.
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PWRSH-DB BM DL (BDD): ETF Research Reports
GLBL-X COPPER (COPX): ETF Research Reports
FT-ISE GLBL COP (CU): ETF Research Reports
PWRSH-DB B METL (DBB): ETF Research Reports
IPATH-DJ-A COPR (JJC): ETF Research Reports
IPATH-DJ-A I MT (JJM): ETF Research Reports
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