Copper prices continue to rally and indications are it won't be long now until it recaptures the US$10,000 a tonne record it reached 10 years earlier.
At the current price of US$9,415.00, copper's only 5.9% away and won't be long till it breaks above its decade peak -- not a tall ask given current strong upward momentum and strong underlying fundamentals.
Economic activity in most parts of the world have picked up the government's relaxed restrictions and/or businesses and consumers adapted to on-going pandemic restrictions, vaccine roll-outs and continued fiscal and monetary policy support.
In its latest World Economic Outlook (WEO) released in April, the International Monetary Fund (IMF) predicted world GDP to expand from -- 3.3% last year to 6.0% in 2021 and 4.4% in 2022 -- representing a 0.5 and 0.2 percentage point upgrade from its January 2021 forecasts - "reflecting the higher-than-expected growth outturns in the second half of the year for most regions after lockdowns were eased and as economies adapted to new ways of working".
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The IMF's revised projections are in line with the OECD's assessment (released a month earlier) where it predicts global GDP growth to expand by 5.6% this year, an upward revision of 1.4 percentage points from its December 2020 forecast.
Because of the red metal's copious and pervasive use in industries - from car manufacturing to electrical goods to construction to solar panels, etc. - the uplift in global economic growth should, in turn, lift demand for the red metal.
Certainly, risks still cloud the near-term outlook. Among them are the lingering coronavirus infections in many countries around the world, with some experiencing a resurgence in cases that have prompted the re-imposition of social restrictions and lockdowns, the slow pace of vaccinations especially among emerging markets, the effectiveness of the vaccines against variants of the virus and growing concerns over its side effects (blot clots).
The rally in copper prices has also been driven by the US dollar's depreciation. The US dollar index (versus major currencies) has now fallen by 11.4% from the 17-year high it recorded in March last year - which, itself, suggests greater investor confidence (i.e., lesser safe-haven purchases) in the revival of global economic activity.
This confidence is backed by assurances from central banks and governments around the world to keep monetary policy and fiscal policy accommodative until the economic recovery becomes sustainable and the world has gotten on top of the covid-19 pandemic and its variants.
Read our full COVID-19 news coverage and analysis here.