All You Need To Know About Copper Stock

May 7th 2016

Buying and selling copper stocks can be a great way to invest your money and earn some. Copper stocks are a solid investment because they are a more conservative approach to buying copper than buying futures or copper exchange-traded funds (ETFs). You might not receive as big of a return on your investment as buying copper futures or copper ETF, but there is much less risk involved.

Unlike copper futures, many factors can affect the price of a copper stock than just the price of copper. Copper stocks tend to fluctuate depending on the behavior of the market in general. If the stock market is moving lower, copper stocks will generally be lower. Alternately, if the stock market is moving higher, copper stocks will likely be higher. Copper stocks move regardless of the price of copper itself and more as a function of the market overall.

Copper Prices

So, when do copper stocks rise and when do they fall? It’s helpful to think of copper in terms of the economy as a whole. The main driver for the demand of copper is the construction of new buildings. If an economy is doing poorly, there will be less demand for new buildings and, thus, less demand for copper. If an economy is flourishing, there will likely be a high demand for new buildings and a higher demand for copper. Higher copper prices usually indicate an economy that is healthy and growing.

Copper Producers in the US

The United States has three major copper producers whose stocks are publicly traded. They are:

  • Freeport McMoRan
  • Southern Copper Corporation
  • Encore Wire Corporation

These are the largest producers in the country, and they therefore make much more conservative investments as far as the industry goes. A lot of smaller copper producers exist, but their production is much more volatile.

Investing in Copper

Copper is a precious metal, like gold and silver, but it tends to move differently because its prices are influenced by industrial supply and demand. During a poor economy, investors may still purchase gold and silver because of its speculative value; while they will sell copper because they foresee a decrease in industrial demand.

You can purchase stocks of companies that mine and sell copper. The stocks act as a reflection of the material itself. It’s a good idea to monitor the market prices and follow the patterns of copper stocks, as well as the movements of the market in general. Buying copper when the economy is in an upswing and selling it when the economy begins to slow is a good general rule of thumb. Keep in mind that it's not just the US economy that influences the price of copper. Growing economies in China, India and elsewhere are increasing the demand for copper, which is why the price may be growing.

You can buy stocks through a broker or by using an online trading account. If you're interested in buying or selling non-US shares of copper companies, contact a broker that specializes in trading on foreign exchanges. You want to be sure you are well informed on the market in general, as well as the specific companies whose shares you are buying.

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