With silver prices spiking recently amid some temporary speculative moves from retail traders, shares of mining companies like Glencore have been in the spotlight – even though their ability to benefit from these short-term fluctuations in the price of a single commodity is fairly limited.
Meanwhile, other commodities are also currently playing a key role in shaping the market’s Glencore share price forecast. In the following article, we will take a closer look at what those influencing factors are and why they can serve as indicators of what may come next for the British miner.
Analysing oil and copper’s correlation to forecast Glencore’s share price
So far this year, the price of West Texas Intermediate (WTI) oil futures has advanced roughly 22%, in addition to copper futures have gained 6%.
In the same period, Glencore shares have moved 10% higher, as mining companies benefit from higher prices in certain metals, such as silver, gold, and copper.
Although the performance of oil and copper does not seem to be connected with Glencore’s share price appreciation at first glance, a correlation analysis portrays suggests otherwise, as both commodities exhibit a strong relationship with the performance of the miner.
According to data provided by Koyfin, the correlation between WTI oil and copper prices with Glencore’s performance has been on a steady uptrend since September 2020, with the weekly correlation index now hovering above the 0.7 level for both commodities.
A correlation higher than 0.7 indicates that a big portion of the performance of the dependent variable – Glencore’s share price – can be explained by the fluctuation in the value of the independent variables – oil and copper prices in this case.
With this in mind, we could analyse both oil and copper individually to determine a plausible Glencore share price forecast for the coming weeks.
WTI futures seem headed for a boom or bust moment
The chart above shows how the price of WTI crude snapped an 8-day winning streak on Wednesday 10 February, with the price per barrel advancing from the low 50s to almost $60 per barrel – the highest level since the pandemic started.
On the other hand, both the MACD and the RSI could be indicating that the momentum might be at its peak, which may lead to a short-term reversal to signal the beginning of a brand new bullish phase.
Meanwhile, given that WTI futures have just stopped at the 2.618 Fibonacci marker shown in the chart, this moment appears to be a boom-or-bust situation for the benchmark – traders should keep an eye on how the price action reacts in the following days and adjust their Glencore share price forecast accordingly.
What about copper prices?
The situation for copper prices also seems bullish, as China – the largest global buyer of the metal – is expected to increase its consumption by 2.6% this year, according to data from Citigroup, with the country stepping off the COVID-19 crisis quicker than other nations.
Similarly to oil, copper is snapping a 5-day winning streak in early commodity trading activity, while the metal seems to be embarked on a fresh new bullish phase that could push its value to $4 per pound.
Glencore share price forecast
Based on the correlation of these two commodities with the performance of Glencore shares, the path for the stock seems bullish as long as the two keep moving forward.
Meanwhile, this view is reinforced by the company’s own stock chart, as the price has just broken above a long-dated trend line resistance, while market players seem resolved to push the ticker to the 300p psychological threshold.
If that were to happen, the price would step into a Fibonacci area that signals positive momentum ahead, possibly aiming for the 350p as a first plausible target for the stock.
Glencore is expected to release its preliminary annual report for 2020 on 16 February.
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