Copper Prices Are Nearing a Top

With every day that passes, the market becomes more focused on one thing...

It's all about AI.

AI is driving all of today's winning trades – from tech... to semiconductor stocks... to emerging markets (thanks to a few massive tech names abroad)... and even certain boring industrial companies.

The massive AI build-out is sparking booms in many sectors. And the raw materials needed to build data centers are booming too.

Today, we're looking at copper. The metal has been hitting all-time highs this year. But now, sentiment has gotten overly bullish... And according to history, we could soon see a top in this soaring metal.

Traders Are Near Bullish Highs on This Metal

Most investors don't think of base metals like copper when they think of AI. But it's one of the many raw materials used to build data centers.

A conventional data center needs 5,000 to 15,000 tons of copper. The new AI-focused data centers, though, can use as much as 50,000 tons. That's a big jump in demand – and as a result, copper prices are soaring.

Copper is up more than 30% over the past year. Now, traders are excited about the metal. And that excitement has likely reached a tipping point.

We can see it through the Commitment of Traders ("COT") report...

The COT is a weekly report that shows the bets of futures traders. It's a useful indicator... because when traders all agree, they're usually wrong.

An all-time high in the copper COT means the metal could be nearing a top. And we're closing in on those levels right now. Take a look...

Copper prices are hitting all-time highs. The COT isn't far behind... It's only slightly below its high from 2021.

Traders love copper today. But as usual, this isn't a crowd we want to follow. When these folks are extremely bullish, copper tends to peak. Just look at the circles marking the highs on the chart...

Over the past 20 years, nearly every multiyear high in the COT happened alongside a top in copper. The only exceptions were in 2021 and the stretch from 2016 to 2018. In those cases, the COT signaled extreme bullishness ahead of the actual top for copper.

With these exceptions in mind, we shouldn't use this COT setup to try to call the exact top. This signal has been early in the past.

What this does tell us is that copper could peak soon. The AI boom will likely push prices a little higher before that happens... But the metal won't rally forever. And with sentiment this stretched, we could see a major drop once copper reverses.

So now is not the time to chase this metal higher. In this case, traders have already made the easy money. And that makes this a dangerous time to bet on copper prices.

Good investing,

Brett Eversole