For Traders from Club iNSIDER: Hedge Funds Accelerate Copper Futures Liquidation – Copper Prices Under Pressure in 2025

Hedge funds are accelerating the liquidation of long positions in copper futures, which led to the price hitting a new high in 2024. The risk is now tilted toward a downward trend at the start of 2025, unless something unexpected, primarily from China, counteracts the positions and price correction. Corn poses a major risk for stop-loss sellers, and crude oil also seems vulnerable to a beta effect, similar to copper.

Long Positions in Copper – Hedge Funds May Retreat

Speculative long positions in copper futures may start hitting stop-loss orders at the beginning of 2025, with macroeconomic consequences. Dropping to 13% of open positions on CME and LME, according to the latest data from January 3 (a significant reduction from the peak of 32% last year), speculators have not had such net long positions since February, but with a big difference – prices and positions back then were set to increase. Our chart shows key factors that could lead to a break in support at $4 per pound of copper – falling iron ore prices and Chinese 10-year government bonds (CGB). Now at 1.62%, CGBs have dropped to nearly a 300 basis point discount compared to U.S. Treasuries – the biggest discount yet. Copper could be on the brink of a deflationary contagion.

The key takeaway is that the metal, known for its “doctor” understanding of the economy, needs to stay above $4 to signal economic stabilization, especially in China. The risk seems to be tilted toward a decline, with U.S. Treasury yields possibly being the next domino effect.

Could Brent Stay Above $80? Heading Toward $60

A prerequisite for Brent crude oil not falling in 2025 could be the resilience of the U.S. stock market. The fallen price of the macroeconomically sensitive crude oil last year, despite record stock levels, could indicate unfavorable supply and demand conditions that futures speculators have recognized. Brent dropped to a net short position of nearly 1% of open interest in September for the first time in our database since 2010, causing a short-term low. Prices surged from the low of 2024 at $68.68, and at $76.51 on January 3, they could be vulnerable, as speculators are once again in net long positions of 6%. Lower prices could be the solution to the growing surplus, especially from the U.S., Canada, and OPEC’s excess capacity compared to declining imports from China. BNEF’s forecast for the breakeven costs of WTI crude oil is $56.

At the moment, when the S&P 500 index is about 20% above its 100-week moving average, it is highly stretched.

Will Corn Stay Above the $4.64 Record from 2019?

Before the largest influx of cash flows in history and Russia’s invasion of Ukraine in 2020-2022, corn prices typically peaked when net long positions of speculators reached 10% of open interest in futures. According to the latest data from January 3, the key question from the chart is: What might be different this time? The corn record of $4.64 per bushel in 2019 was achieved when net long positions of speculators reached 10%. At around $4.50, the world’s most important agricultural commodity seems vulnerable at the beginning of the new year. If corn can stay above $4.64, it would signal a potential end to the bear market. Our outlook is for a continued downward trend, and for what is typically required for bear market bottoms – persistently low prices. Speculators may be expecting the first USDA report for 2025 on January 10 to show less supply and greater demand than expected.