$HGC1, $CU

FLASH: Managed Money Driving Explosion in Copper (CU) Options in Big Bet on Prices

A persistent Copper shortage has spurred a 32X explosion in the COMEX options market over the last 2 years as hedge funds and other speculators move to cash in on rising prices.

Copper at the close in Chicago Tuesday: Copper: +0.7% to $2.93/lb

On LME Copper: LME Copper market stocks have fallen to extremely low mark pushing spreads tighter. The broader availability of Copper was amply demonstrated by last week’s 80,000-tonne pace of deliveries into the LME system.

Outstanding Call options climbed to a record 44,571 contracts Monday, from 1,384 just 2 years earlier as global output continues to trail consumption.

Shortages of the Red metal that is used in wires for power grids, buildings, homes, along with electronic gadgets including cellphones and cars are expected to persist through Y 2022, according to Citigroup NYSE:C)

The slowing supply outlook has spurred an 11% price rally this year as spending cuts limited the ability of miners to ramp up production and regulatory hurdles delay the development of new mines.

“You do not need an awful lot of demand to have the market basically in deficit,” Michael Widmer, Head of Metals research at Bank of America/ML in London, said in a telephone interview.

Copper miners do not invest in mines if they do not have incentives to do so, and the biggest incentive for miners is higher revenues.

Typically, it takes as long as 9-10 years for mine production to react to price rallies according to the data.

Stay tuned…

  consumption, Copper, CU, demand, funds, HGC1, invest, LME, managed, mine, miners, money, options, price, production, rally, revenues

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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