LONDON: Copper prices rose to a three-week high on Thursday as investors anticipated slower US interest rate rises and improved demand from top consumer China.
The Fed delivered another 0.75% rate increase on Wednesday, but comments by Chairman Jerome Powell and weak US GDP data have led to hopes of smaller increases in the future.
Investors responded by buying riskier assets. World shares reached a six-week high and the dollar weakened, helping dollar-priced metals by making them cheaper for buyers with other currencies.
Benchmark copper on the London Metal Exchange was up 1.4% at $7,742 a tonne at 1615 GMT.
Prices of the metal used in power and construction are up around 11% from a 20-month low of $6,955 on July 15, but are still down 20% this year.
“The pain from rate increases is likely to be greater now than in the future,” said WisdomTree analyst Nitesh Shah. “If signs of recession are picked up by the Fed, at some point they’ll go into easing mode.” Higher interest rates restrain economic growth and demand for metals. The US economy unexpectedly contracted in the second quarter, data showed on Thursday.
Copper prices are expected to rebound to average $8,134 a tonne in the fourth quarter, a Reuters poll of analysts found, as China unleashes more stimulus.
The Financial Times reported that China will issue 1 trillion yuan ($148.2 billion) in loans for stalled property developments.
Investors also hope a meeting of China’s Politburo in the coming days will release more spending on metals-intensive infrastructure.
“More stimulus will help bolster market confidence,” said CRU analyst He Tainyu. “But pressure is here to stay if China’s exports and property markets remain weak in the longer run.” LME aluminium was up 1.5% at $2,458 a tonne, zinc rose 3.4% to $3,157.50, nickel gained 0.3% to $21,880 and tin was up 0.2% at $24,380. Lead fell 0.5% to $2,003.
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