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 0.5% to $8,385 per metric ton by 1044 GMT, breaking through the 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 U.S. 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.
Copper extends gains on China demand, rate cut hopes
“But if U.S. rates stay higher for longer, this would lead to a stronger U.S. 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 from the Chinese leaders’ annual Central Economic Work Conference, which is likely to end 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 1.1% to $2,140 a ton while zinc added 1.3% to $2,439. 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 1.0% at $2,076.5, tin advanced 1.4% to $24,700 while nickel fell 0.1% to $16,585.