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A Lower Dollar Pushes Copper Higher

A Lower Dollar Pushes Copper Higher

By Jim Williams

Copper prices rose to their highest in more than a week on Tuesday as the U.S. dollar slipped.

Benchmark copper on the London Metal Exchange ended up 2.1 percent at $4,735 a ton, after hitting $4,754.50 earlier Tuesday – copper’s highest since October 13.

The following chart shows the historical price path of copper on the LME over the last month.

The dollar wasn’t the only thing fueling the rise in copper. Recent fiscal and monetary stimulus in China has boosted investment and demand for base metals and supported prices this year.

“There’s some talk of fiscal stimulus in China, but there’s nothing concrete, it’s more anecdotal,” said Julius Baer analyst Carsten Menke. “There is scope for stimulus given the neutral numbers last week. There has been a jump in commodity prices. This usually happens when there is a pickup in speculative interest.”

While copper prices have rallied from their January lows, investors looking for further big gains may be disappointed as ample supplies are likely to more than offset stronger demand in top consumer China.

Fears about demand growth in China, which accounts for nearly half of global consumption estimated at around 22 million tons this year, pushed copper to $4,318 a ton in January, its lowest since May 2009.

Fiscal and monetary stimulus in China, spending on infrastructure and a stronger property market helped prices recover to above $5,000 a ton in July, and since then copper has traded in a $4,500 to $5,000 range.

“We can argue about whether Chinese demand growth is zero, one, two or three percent,” Guy Wolf, global head of market analytics at Marex Spectron told Reuters. “But it’s hard to imagine what would push it into the high single, double digit percentages needed to push up prices significantly.”

Stronger manufacturing surveys in the United States and Europe have also helped push the red metal higher.

Copper and the Upcoming Election
The race for the White House ends in less than two weeks. Frequent tED contributor Andrew Hecht has written an article to show what impact both presidential candidates would have on commodities (including copper) if he/she wins on November 8. You can read the article here.

 

 

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