The last year’s financial crisis questioned the belief that industrial commodities follow a constant cycle of rising prices. However, since early 2012 the copper is increased over 11% clear indication of a renew investors’ interest.
 
Inflation’s risks incite investors to take long positions on commodities, especially after FED Chairman, Ben Bernanke, announced the possibility of a new quantitative easing.
Although the economic climate is not untroubled, but good macroeconomic indicators have supported acceleration in copper prices. For example, following a positive announcement concerning unemployment in US, copper has gain 200 dollars in less than three hours.
On the supply side, most of the world’s largest copper miners have reported falls in production for 2011, despite a record price during last year. This production decline has raised the pressure on LME’s stocks, according to Financial Times, which feel about 30% since October.
 
Contango situation in which copper’s contracts are (the price of copper’s contracts futures is higher than copper’s price spot) underline that many investors are in a long position on the futures contracts which drive short traders to cover their position.
 
Technically, the asset is in upward trend in the short-term due to surge since early January. From its low of 6721 USD hit in late October, the copper has retraced nearly 60% of the downward trend began last August.
Considering a high elasticity of consumption in China and profit-taking, we think copper could drop in short-term. The first target could be fixed at 8150 USD, and then the downward movement might continue until the short-term support around 7900 USD. At this price, demand could strengthen in the frame of economic situation’s brightening. We might consider a return at 9000 USD in the second quarter of the year.