LONDON: Copper prices rose in London on Tuesday, supported by a weaker dollar, the prospect of tighter supply next year and hopes of more economic stimulus from top metals consumer China.
Three-month copper on the London Metal Exchange rose 0.2% to $8,361 per metric ton in official open-outcry trading, facing resistance from its 21-day moving average at $8,379.
Making dollar-priced metals more attractive for buyers using other currencies, the dollar ticked lower with traders’ focus on US inflation due at 1330 GMT which could frame Wednesday’s Federal Reserve policy decision.
Elevated rates and the stronger dollar have been a drag on growth-dependent industrial metals in the past two years, said Ewa Manthey, ING’s commodities strategist. ING expects the starting point for Fed rate cuts in the second quarter of 2024.
“Metals prices will benefit from looser monetary policy, which will alleviate the financial strain on manufacturers and construction companies by reducing borrowing costs,” she said. “But if US rates stay higher for longer, this would lead to a stronger US dollar and weaker investor sentiment, which in turn, would translate to lower metals prices.”
Investors are also closely watching for the 2024 economic targets and stimulus plans following the Chinese leaders’ annual Central Economic Work Conference.
China will focus on boosting effective demand next year, and make concerted efforts to expand domestic demand, state media said, citing the conference which ended on Tuesday.
“A further boost for China’s property sector will be crucial in supporting demand (for metals) going forward,” Manthey said. On the supply side, recent mine closures and disruptions that have prompted analysts to lower their forecasts for surpluses support copper prices. Aluminium rose 0.9% to $2,136 a ton in official activity while zinc added 1.5% to $2,443. Both metals hit their lowest since late August on Monday.
The discount for cash aluminium against the three-month contract reached its three-month high of $47 per ton at Monday’s market close. Lead was up 0.9% at $2,075, tin advanced 1.8% to $24,800 and nickel fell 0.7% to $16,490.
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