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Copper Update: The Red Metal Continues to Soar

By Jim Williams

After gaining for seven consecutive weeks, copper continues to soar. The red metal hit $3.10 in trading yesterday before settling a little lower at the bell. For the year, copper is up 23.4 percent and continues to nearly double gains of the next highest commodity.

Copper opened this morning at $3.05 a pound – as the red metal continues to hover close to three year highs with all signs pointing to continued growth.

Improved market sentiment and increased expectations of demand growth in China are getting the credit for the latest rise in copper. A weaker U.S. dollar is also helping.

Investment group Angel Commodities supports the dollar theory, predicting copper will continue to trade higher because of weakness in the DX.

If you aren't familiar with the DX, we looked it up for you. The U.S. Dollar Index (USDX) futures contract is a leading benchmark for the international value of the U.S. dollar and the world's most widely-recognized traded currency index. It monitors moves in the value of the US dollar relative to a basket of world currencies, as well as hedge their portfolios against the risk of a move in the dollar.

Chinese manufacturing data
As usual, all things copper point to China. The China Federation of Logistics and Purchasing will release August manufacturing data on Thursday (see list of events below). Investors expect a modest downtick to 51.3 from 51.4 in July.

The Caixin manufacturing index, which focuses more on small and mid-sized firms, is due late Thursday. All signs point to that number also dropping by 0.1 to 51.0. Anything above 50.0 signals expansion, while readings below 50.0 indicate industry contraction.

China's economy grew a faster-than-expected 6.9 percent in the second quarter, matching the first quarter's pace.

The Week Ahead
In the week ahead, investors will focus on Friday's U.S. jobs report for August, as well as keep a close eye on a revised reading of U.S. second quarter growth. We will also keep up-to-date on any impact Hurricane/Tropical Storm Harvey may play on the markets in general. Here is Investing.com's list of significant events for the week:

Tuesday, August 29
Canada is to release data on raw materials price inflation.
The U.S. is to report on consumer confidence.

Wednesday, August 30
Australia is to release data on building approvals and completed construction work.
Germany is to release preliminary inflation data.
The UK is to produce data on net private lending.
The U.S. is to release the ADP nonfarm payrolls report as well as revised data on second quarter growth.

Thursday, August 31
China is to release survey data on activity in the manufacturing and services sectors.
New Zealand is to publish a report on business confidence.
Australia is to produce data on private capital spending.
The euro zone is to release its preliminary inflation estimate while Germany is to report on retail sales.
Canada is to release monthly data on GDP growth.
The U.S. is to put out a string of data, including reports on jobless claims, personal income and spending and pending home sales.

Friday, September 1
China is to publish its Caixin manufacturing PMI.
The UK is to release data on manufacturing activity.
The U.S. is to round up the week with the non-farm payrolls report for August and the Institute for Supply Management is to publish its manufacturing index.

Further Reading
Copper is soaring, but will it last? Check out this mining.com article to see how they think doubt may be creeping in on the red metal.

 

 

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