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Copper Looks To Extend Its 4-Month High

By Jim Williams

Copper prices opened steady in early trading Tuesday, holding firm on gains made following strong economic data out of China.

Data released Monday showed China's economy expanded 6.9 percent in the second quarter. News of China's economy expanding faster than expected boosted the outlook for demand of the red metal.

“This data appeared to boost confidence in the country's ability to weather the regulatory reforms that are appearing to tighten monetary conditions in China,” ANZ said in a note.

Looking deeper at the numbers, seasonally-adjusted quarter on quarter terms the growth was even more significant, picking up from 1.3% to 1.7%.  Experts predict the surge is enough to set the country on track to meet its 2017 growth target. In fact, if the trend continues, this year would be the first time since 2010 that the Chinese economy grew faster than the year before.

Commerzbank warned against moving into copper too quickly. “[We] do not believe the momentum will be maintained throughout the second half year,” the bank said in its daily note.

“The China data was very helpful,” FX strategist Koon Chow told Reuters. “I think it had a particular resonance after Friday's (weaker than expected) U.S. CPI and retail sales data…so it is extending the Goldilocks environment,” he said referring to a not-too-hot, not-too-cold market climate.

Regardless of what way you interpret the numbers, the economic news out of China helped put a bow on what already was a pretty good present at the end of Q2 for those interested in copper. According to Seeking Alpha, COMEX copper futures gained 7.59% over the first six months of 2017. Copper also gained 7.9% on the London Metals Exchange. Copper was the best performing nonferrous metal for the first six months of the year and closed on June 30 at $2.6990 per pound on COMEX and $5,917 per ton on the LME. The red metal finished the second quarter on a high note gaining 1.66% on COMEX, 4.4 cents above its close at the end of Q1.

The U.S. dollar isn't having such luck. The buck slipped to a 10-month low as passage of a new U.S. healthcare bill looks doubtful, and as investors expect the Federal Reserve will be more cautious about raising interest rates.

“The current environment of a weak dollar and rising rates amounts to a steel cage death match in markets,” notes frequent tED contributor Andrew Hecht of Seeking Alpha. “Commodities are likely to continue to be the ‘monkeys in the middle' looking for direction from supply and demand as macroeconomic forces are providing conflicting influences on prices.”

We will continue to monitor copper and report what we find here as we move forward in Q3 with an eye on the end of 2017.



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