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The Highs and Lows of Copper

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The Highs and Lows of Copper

Copper prices were down in early trading Tuesday, dropping from Monday’s one-week high. This morning’s drop put a damper on the past two days of gains which were sparked by expectations of strong demand in China.

Three-month copper on the London Metal Exchange eased 0.5 percent to $6,212.50 a ton after climbing on Monday to its highest since Oct. 15 at $6,331.50. The red metal opens for trading in the U.S. at $2.76 per pound. This is slightly lower than last week at this time. Click on the chart below for up-to-the-minute pricing.

Copper prices had a good run on Friday and Monday after authorities in China said they would take measures aimed at bolstering growth and liquidity.

China’s central bank governor said last week they would roll out targeted measures to help ease company financing problems and encourage commercial banks to boost lending to private firms. According to Reuters, China’s tax cuts next year could exceed the equivalent of 1 percent of gross domestic product, a sign policymakers might be considering another round of tax reductions.

“President Xi Jinping’s unwavering support for non-state firms to invest in the economy and personal tax cuts helped improve investor sentiment,” ANZ said in a report. “However, the gains were somewhat constrained by ongoing trade tension. U.S. President Trump’s economic advisor accused China of refusing to engage on trade issues,” the report said.

China’s economic growth cooled to its weakest quarterly pace since the global financial crisis, with regulators moving quickly to calm nervous investors as a years-long campaign to tackle debt risks and the trade war with the United States began to bite.

This week those interested in the price of copper will continue to watch developments in equity markets and monitor geopolitical risks. Investors will also be focusing on Friday’s data on U.S. third-quarter growth, while monetary policy decisions from the European Central Bank and Bank of Canada will also be closely watched.

The GDP data is expected to show that U.S. economic growth slowed in the third quarter from the second, when the economy grew at its fastest pace in four years.

Investors will also be getting an update on the health of the U.S. housing market, which has been hit by rising borrowing costs as a result of Fed rate hikes, with the release of figures on new and pending home sales. All important to the price of copper due to the amount used in new home construction.

Ahead of the coming week, Investing.com has compiled a list of significant events likely to affect the markets.

Monday, October 22

Canada released data on wholesale sales.

Tuesday, October 23

Bank of England Governor Mark Carney is to speak at an event in Toronto.

Wednesday, October 24

The euro zone is to release data on private sector activity.

The Bank of Canada is to announce its benchmark interest rate and publish a rate statement, which outlines economic conditions and the factors affecting the monetary policy decision.

The U.S. is to report on new home sales.

Thursday, October 25

New Zealand is to release data on trade.

The Ifo Institute is to report on German business climate.

The European Central Bank is to announce its latest monetary policy decision. The announcement is to be followed by a press conference with President Mario Draghi.

The U.S. is to release reports on durable goods orders, initial jobless claims and pending home sales.

Friday, October 26

The U.S. is to release preliminary data on U.S. third-quarter growth as well as a report on consumer sentiment.

ECB President Mario Draghi is to speak at an event in Brussels.

Further Reading

Frequent tED contributor Andrew Hecht of Seeking Alpha takes an in-depth look at the red metal and a very positive outlook based on a ‘what if’ the trade war between the U.S. and China is resolved in his article Copper Is Going Nowhere While LME Stocks Plunge – Put DBB On Your Radar.

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Jim Williams

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