7 Key Differences in the middle Copper and Gold Futures

Copper futures are section of their alloys futures stock category, that is composed of aluminum, palladium, silver, gold, silver and gold. Technically called as High Grade Copper, the aluminum futures contracts are standardized currency traded futures contracts allowing the client and seller to innovate and to accept delivery of their real stock, or pay for money in a predetermined cost on another shipping date.

The principal participants at the copper stocks marketplaces would be the consumers and manufacturers that are able to purchase and sell the futures for number of reasons such as for example to fulfill with the requirement or to market their vulnerability. Even a brief hedge in aluminum stocks enables the merchants (manufacturers ) to lock at a sale cost for aluminum while for consumers (organizations ), the aluminum futures allows them to lock in a purchasing cost for aluminum hence discriminated against future volatility of aluminum amounts.

Besides the manufacturers, the copper stocks marketplaces have been also regulated by speculators like hedge funds and short-term futures traders that is able to simply take improvement of their marketplace volatility and so day trade the aluminum stocks marketplaces to get a benefit.

Copper for a metal is primarily mined and it has been used for over centuries using fresh uses of aluminum being detected today. Copper is among the very frequently used metals which range from home like pipes, pipesand heating and heating system to be utilized even at the medical industry in addition to industrial production and manufacturing.

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Copper Futures Price Chart (Standard Futures Contract)

Copper Futures Contract Specifications

High grade copper futures are primarily transacted on the London Metals Exchange or the New York Mercantile Exchange (NYMEX) through the Commodity Exchange (COMEX) which is part of the CME Group. The high grade copper is also referred to as the ‘A’ grade copper futures. The copper futures pricing is quoted in dollars and cents per metric ton.

A standard copper futures contract controls 25 tonnes on the London Metals Exchange (LME) with the ticker CA, while the NYMEX copper futures are traded in units of 25000 pounds quoted in dollars and cents per pound with the ticker HG.

Of course, in the middle the two, the NYMEX copper futures are the more popular contracts. Day traders can speculate on the short term cost movements in copper futures. Below is a brief summary of the copper futures contract specifications.

Ticker HG
Contract Unit 25,000 pounds
Contract Months 12 months with the current month being the actively traded contract. Trading is also available for the next 23 calendar months
Last trading day Third last business day of the trading month
Tick size 0.0005
Tick Value $12.50
Trading hours 6:00PM – 5:15 PM EST

Besides the standard copper futures, there is also the e-mini copper futures contract, which is half of the standard futures. This means that the e-mini copper futures control 12,500 pounds, half of the standard futures contract size. Below is a brief summary of the e-mini copper futures contracts.

Ticker QG
Contract Unit 12,500 pounds
Contract Months 12 months with the current month being the actively traded contract. Trading is also available for the next 23 calendar months
Last trading day Third last business day of the trading month
Tick size 0.002
Tick Value $25.00
Trading hours 6:00PM – 5:15 PM EST

An important aspect to remember about the mini-sized copper futures contract is that the pricing is slightly different. This is due to the difference in the tick size (0.002 and 0.0005), which leads to a rounding error. Therefore the settlement cost of the e-mini futures contract is different from the ‘authentic ‘ settlement cost of the standard copper futures contract.

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Copper Futures Contract Volume

Between the conventional and also the e mini aluminum futures contracts, the normal contracts like higher quantities as shown from the above graph.

While copper and gold futures contracts belong to precisely the equal category, the trading approach can be somewhat different. Even though both the alloys are high priced at U.S. dollars the principles which help determine the cost volatility is different. Below are just seven chief differences in the middle copper and gold futures.

Number 1 Copper stocks amounts are determined by home construction

Due to the very fact that aluminum is commonly utilized at home building, the home industry from the U.S. performs a very major part in forming the aluminum futures cost trends. Found in plumbing, pipes, plumbing etc.. Copper amounts required a potent beating following the 2008 catastrophe kicked off a downturn. Since home-building slowed, the copper amounts too started to fall considerably.

On the flip side, gold amounts have a tendency to do pretty nicely throughout downturn as the international uncertainty frequently contributes to investors and traders flocked to the safehaven stock status of their metal.

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Copper futures cost v/s Gold futures cost comparison

The above chart shows a comparison of the Copper futures chart (mountain) and the gold futures chart (line). Although both the cost trends tend to move in a similar fashion, you can see that the decline in copper amounts were more significant in the height of the financial crisis.

With the U.S. housing and construction data coming out every few weeks, copper amounts tend to exhibit short term volatility to these flash economic indicators which can give early clues in the demand side of the business.

#2 Use of substitutes for copper

Copper as a metal faces stiff competition from other alternatives such as aluminum. Therefore the amounts of aluminum and copper are tied together. When the cost of Aluminum is cheaper, consumers prefer to use this metal for the equal purposes such as power cables, plumbing, industrial uses such as heat exchangers and so on.

Although Aluminum does not fully replace Copper and vice versa, the cost fluctuations in either of these two metals tend to reflect over time.

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Copper and Aluminum cost comparison

The graph above shows Copper futures amounts and also the aluminum stocks amounts, both of which often proceed around in cycles.

Although there’s not any replacement gold, the metal may usually be blended with other alloys. Together with gold futures, the amounts will not rise and fall as silver such as appreciates or depreciates.

Number 3 Gold could be your favorite safehaven stock at risk off Tales

Gold stocks amounts usually are bid higher over times of financial or geo political uncertainty. The marketplace reaction to gold is both temporary and long haul. On a shortterm premise, gold amounts are influenced by wider U.S. economic statistics like inflation, occupations, GDP which finally influence the Federal Reserve’s decisionmaking on short-term rates of interest.

Copper futures alternatively have a tendency to mistreat gold amounts. The wider consensus being a poorer market usually sees’s a direct affect slowing demand from the industrial industry encompassing manufacturing and construction. But, copper futures amounts often react in an infinitely more efficacious manner in contrast to this of gold futures amounts.

Number 4 Copper stocks requirement and provide (China – Australia)

Copper requirement for China has been among the chief drivers of cost in gas futures. A growing market regularly contributes to higher need for aluminum along with China being one among their primary exporters plays with a major part in effect the amounts of aluminum. On the other hand, Australia like a mining export state also plays a major part. In reality, gas amounts are recognized to possess a direct effect in the Australian dollar while the rise and collapse of exports finally lead to the Australian buck ‘s market rate.

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Copper futures and Australian dollar correlation

The above chart shows a comparison of the Australian dollar futures and copper amounts. It is not hard to miss the correlation in the middle the metal and the currency.

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Although gold amounts do have some correlation to the Australian dollar given that gold is also mined in Australia, the correlation is a lot weaker with the influence of the U.S. dollar also playing a big role.

#5 Emerging marketplace demand for Copper

The demand for copper has developed significantly from emerging marketplaces, name China and India. While growth in China has moderated to around 6% over the past few years, the previous strong growth in the region saw developed demand for copper thus indirectly pushing copper amounts higher. Over 40% of the world’s copper is largely produced in North and South America, with 31% from Asia and 21% from Europe.

Over the past years, as the China boom continued, the developed pace of housing and infrastructure development in the world’s second largest economy saw copper amounts rising accordingly.

When trading copper futures, traders need to pay attention to the demand dynamics, particularly from Asia.

When you look at gold, although China and India are two big players on the consumption side of the precious metal, there are also other factors to consider, which greatly diminishes the level of impact demand has on gold compared to copper futures.

#6 Precious metals and base metals

Although gold and copper are clubbed together under the ‘alloys ‘ category, gold, alongside platinum and palladium are further categorized under the precious metals category. Copper on the other hand is known as the base metals.

From an investors perspective, allocating a portion of their portfolio to the precious metals sector is a given. However, investing in base metals is more of a personal choice than diversification. Precious metals are primarily used in high-end products whereas base metals are used in just about any industrial sector. This means that gold amounts are influenced not just by the demand but also from an investing perspective which eventually see’s different cost movements from both these metals.

#7 Comparing gold and copper futures contracts

From a purely trading perspective and to decide which of the two contracts are cheaper or more expensive to trade, the following gives a comparison in the middle the gold and copper futures contracts.

Name High Grade Copper Gold
Ticker HG GC
Contract Size 25,000 lbs 100 ounces
Tick Size $0.0005 $0.10
Tick Value $12.50 $10
Full dollar point $25,000 $1000
Initial Margin* $7,763 $5808

*Approximate values

The above table clearly shows that gold futures contracts are a lot less expensive to trade compared to copper futures. For traders who find the standard gold futures contracts to be expensive, other alternatives such as trading the e-mini gold futures contracts is a viable option. While a similar futures contract exists for copper, the lack of low volumes makes it a bit difficult to trade, along with the fact that due to the rounding due to tick difference can mean different pricing on the whole.

Copper futures do make for an ideal commodity futures contract but for traders who are certain that they want to trade this stock. Unlike gold which is more popular and the cost volatility being a bit more predictable, with copper futures, traders need to pay attention to a lot of different factors ranging from supply/demand to the housing and industrial sectors. Still, if a trader prefers to trade an stock outside of the most commonly traded metals, trading copper futures can be an option worth exploring.

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