Copper prices are expected to be volatile as uncertainties in the global economy remain entrenched. A note from Standard Chartered released today does however suggest that the downside risk to the copper price should be limited: "Fund players remain cautious about a rebound in copper prices from here due to uncertainties about the global economy. However, physical traders and consumers in China have a different view of short-term prices. Two leading physical trading firms in China told us last week that it is very difficult to buy copper within Asian markets following the recent drop in LME prices due to the tight physical market. Spot premiums in Singapore have rallied to their highest level since January (to around USD 90/t in the first week of October). "These firms, while also cautious on buying, expect copper to reach a floor at around USD 7,000/t on the back of strong premiums. Given these factors, we think copper prices could be volatile around current levels, but the downside should be limited." Nevertheless, despite last week's rebound, Standard Chartered think it is too early to call the floor for copper, as it would be unwise to expect a sharp price rally from here given the attitude of hedge funds. But analysts remain bullish in the medium term (12-month view). "We expect copper prices to rally quickly once signs emerge that Europe can sort out its debt problems," say Standard Chartered.

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