What is Copper Futures Trading in India?

Copper finds wide applications in the electrical industry, construction, and manufacturing; hence, metal is of utmost importance in commodity trading. Trading in copper futures in India essentially presents an opportunity for traders to harness volatility in markets. This will be a strategic hedging tool for managing inflation risks and enhancing diversified investment portfolios. In addition, the constant growth of infrastructure across the world, as well as technological advancement, poses a great need for copper. That's why speculating on copper futures makes good sense to capitalize on these long-term sustained trends. In this blog, we will familiarize ourselves with all the aspects of copper futures trading, its benefits, and the ways to trade it, including how to purchase copper futures, etc.

Understanding Copper Futures

A copper futures contract is an agreement between traders to sell or buy copper at a future date. Futures traders use leverage to purchase contracts on an exchange. If prices decrease, the trader must provide extra margin to keep the position open. When a futures contract expires, the trader must decide whether to physically deliver the commodity or roll the position forward to the next month. Copper futures are regarded as a more advanced trading strategy since they necessitate active position management on the trader's part.

Click here to learn about how intraday trading works

Trade like a pro in NSE F&O with Zero Brokerage*

Start Trading

* By signing up you agree to our Terms and Conditions

How are Copper Rates Decided?

Many factors are responsible for affecting the price of copper, such as the availability of supply, the status of economies around the globe, the cost of production, and the extent of political stability. Out of all these, demand is the most significant determinant; when there is an upsurge in demand, prices generally go up, and they go down in low-demand periods. One should pay attention to the general health of the world economy because the demand for copper tends to rise in periods of economic expansion and fall in periods of recession. The costs of production also affect the price estimates of such commodities; a rise in cost could result in a rise in goods prices, and a cost reduction could also reduce goods prices.

Methods to Trade Copper

Here are some of the methods for trading copper futures.

• Copper in Physical Forms: This happens when you acquire a tangible amount of copper and hold it as an asset until you're ready to sell it.
• Contracts For Difference (CFDs): This allows you to trade real-time price fluctuations without purchasing physical copper. As CFDs are leveraged products, you can gain total exposure to the underlying transaction with a bit of investment. Profits and losses are exaggerated since the profit or loss is calculated based on the whole magnitude of the trade position.

Importance of Investing in Copper

Here is why investing in copper can be a good option for investors. 

• Copper is a very liquid metal with well-defined chart patterns.
• Because copper is valued in US dollars, the value of the dollar influences the price of copper.
• Copper trading strategies include both technical and fundamental analysis.
• Copper prices tend to grow when developing countries thrive since demand is driven mainly by building and construction.

Factors That Influence the Copper Price

Copper prices are primarily influenced by the following factors: 

• Growth in Global Economies: There is an increasing demand for copper with an increase in the economies of the countries especially because copper is used in constructions and infrastructural works.
• Industrial Requirement: These sectors especially automotive and electronics consume a lot of copper. Any increase or decrease in the demand from these sectors can have a market impact on the copper price.
• Supply and Production Costs: The cost of mining and processing copper and supply levels can impact copper prices. Higher production costs usually lead to higher prices.
• Geopolitical Factors: Political unrest in nations that produce copper can interfere with supply chains and result in fluctuations in prices.

Advantages of Trading in Copper

Here are some advantages of trading in copper:

• High Liquidity: Copper is a highly liquid market with significant trading volumes, making it easy to enter and exit positions without impacting the market price.
• Diverse Applications: Copper’s extensive use in electrical wiring, plumbing, and electronics ensures consistent demand. This broad application base provides stable trading opportunities and potential for profit.
• Inflation Hedge: Copper serves as an effective inflation hedge, similar to other commodities. When the prices of goods and services escalate, the value of copper typically rises. Thus it helps in safeguarding investment portfolios from the adverse effects of inflation.
• Advantages of Diversification: Engaging in copper futures trading enables investors to broaden their portfolios beyond conventional asset categories such as equities and fixed-income securities. This diversification can mitigate overall portfolio risk while potentially increasing returns.

Copper Production and Supply

Chile, Peru, China, the Democratic Republic of the Congo, the United States, and Australia are the top copper producers. Chile contributed 5.8 million tonnes of the total global output of 21 million tonnes in 2018. India produces a small quantity of metal, accounting for around 2% of global output. Copper is mined in the Indian states of Rajasthan, Jharkhand, Madhya Pradesh, and Sikkim.

Conclusion

Investment in copper futures will, therefore, be a good venture as its demand is bound to rise. But like all commodity prices, the price of copper is turbulent. While trading in copper futures, investors should take into consideration all domestic and international factors that could influence the demand and price of copper. Staying informed about the latest industry developments and maintaining a disciplined approach can make investing in copper futures quite lucrative. For a better trading experience, consider using a reliable stock market app.