Copper prices: BofA warns long positions remain at risk of stopping out

CME copper futures plummeted over 20% following President Trump's exemption of refined copper from import duties, prompting significant market repositioning. Bank of America reported that while trend followers had built long positions, many have now stopped out of their CME copper longs, though LME positions remain vulnerable. Conversely, medium to longer-term trend followers maintained near-maximum long positions in gold, which strengthened after the jobs report, highlighting divergent CTA strategies influenced by policy shifts and economic data across commodity markets.

Analysis

A sudden reversal in U.S. trade policy, specifically an exemption for refined copper from import duties, catalyzed a sharp sell-off in commodity markets, with CME copper futures plummeting over 20%. This event triggered a significant deleveraging among systematic trend-following funds. According to Bank of America, commodity trading advisors (CTAs) that had been accumulating long positions in CME copper were largely forced to liquidate, hitting stop-loss levels. While LME copper futures experienced a more muted decline, the remaining long positions are now highly vulnerable to further price drops. In sharp contrast, gold futures demonstrated strength following a recent jobs report, allowing medium to longer-term trend followers to maintain their near-maximum long positions. This divergence highlights a key market dynamic: industrial commodities are currently highly sensitive to unpredictable policy shifts, while precious metals are responding to traditional macroeconomic data, leading to starkly different positioning and risk profiles among systematic investors.

Key Decisions for Investors

• Investors should exercise extreme caution with copper exposure, as the forced liquidations in CME futures and the remaining vulnerable longs on the LME signal a high risk of continued price volatility and potential further downside.
• Monitor CTA positioning as a key indicator of market sentiment and fragility; the washout in copper and the crowded long trade in gold demonstrate how these flows can both amplify trends and exacerbate reversals.
• Acknowledge the significant divergence within the commodities complex, as industrial metals are being driven by unpredictable trade policy announcements while precious metals are reacting to economic data, necessitating a nuanced, non-monolithic investment approach.