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Copper fell to a two-month low, after China announced its plan to sell reserves.
But analysts said this lower prices opens a good opportunity to purchase, especially since China's moves will have no impact on supply and demand fundamentals. In addition, many expect copper to be in short supply over the next three years, as it will take time to expand.
So, in the short term, it is better to open short positions because prices are likely to go down. But in the long term, there are great opportunities to set up long positions.
Going back to China, the government said it will arrange shipments of copper, aluminum and zinc to non-ferrous metal processing and production facilities at public auction. However, the National Food and Strategic Reserves Administration did not specify the amount it could allocate for each metal.
This news led copper to fall by 3%.
Although copper prices may continue to fall shortly, Sean Lusk, vice president at Walsh Trading, said he is still optimistic about the metal. He reasoned that reserves will be replenished, and that supply will decline. But traders still need to be careful when trading in the market because copper demand is increasing and the problem of deficit cannot be solved at the expense of China's strategic reserves.
Mike McGlone, senior analyst at Bloomberg Intelligence, also said he does not believe that China, which has sold its copper reserves, will be a game changer in the market.
And while everyone is watching copper, investors still need to keep an eye on the stock markets as this can have a significant impact on prices.
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