How Are Silver And Copper Prices Impacting CME’s Metal Trading Volumes?

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CME Group‘s (NASDAQ:CME) metal derivative trading volumes have seen a significant increase over the last two years. In addition to fluctuations in gold prices (as discussed in a previous article), the surge in volumes was partly driven by uncertainty surrounding the prices of copper and silver, which together account for about 40% of the exchange’s metal volumes. Continued volatility in the silver and copper markets is likely to boost the exchange’s trading volumes further in the near future. Below we take a look at how silver and copper prices have impacted the exchange’s derivatives volumes.
metal composition

How Have Silver Prices Trended?

Industrial demand for silver has declined slightly over the past year as a result of a decline in semiconductor sales, and investment demand for the metal has been volatile. The winding down of the Federal Reserve’s Quantitative Easing (QE) program in 2014 dampened the safe haven demand for silver, pressuring prices. However, prices have rebounded sharply this year amid heightened macroeconomic uncertainty and subdued economic growth.

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silver

How Have Copper Prices Fared?

Demand for copper is correlated with industrial growth, and consequently economic growth. China is the world’s largest consumer of copper, accounting for over 40% of the global consumption of the metal. A slowdown in Chinese economic growth over the past few years has negatively impacted Chinese imports of copper, and consequently global demand for the metal. As a result of weak demand conditions, copper prices have declined over the course of 2014 and 2015 and are expected to decline further in 2016.

copper

How Has CME Benefited?

CME has largely benefited from the volatility in silver and copper prices over the past few years, with trading volumes for the metals increasing by more than 38% over the previous two year period. Continued macroeconomic uncertainty is likely to continue driving near-term demand for silver as a safe haven asset, as well as copper demand in China. These factors are likely to drive metals trading volumes in the coming quarters.

See the full Trefis analysis for CME Group.

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