Copper firms on weak dollar and hope for slower rate hikes
LONDON — Copper prices drifted higher on Thursday, buoyed by a weaker dollar, optimism that the pace of U.S. interest rate hikes will slow and further support for China’s troubled property sector.
Three-month copper on the London Metal Exchange (LME) gained 0.2% to $8,022 a tonne in official open-outcry trading. Volumes were thinner than usual because of the U.S. Thanksgiving Day holiday.
LME copper has shed about 6% since touching a five-month high on Nov. 14, mainly owing to fears about burgeoning COVID-19 cases in top metals consumer China.
However, the market received a boost late on Wednesday when U.S. Federal Reserve minutes showed that most policymakers agreed it would “likely soon be appropriate” to slow the pace of increases to interest rates.
“A corner has been turned, so all those fears of recession risk are receding. The Fed minutes seemed to cement that pivot,” said WisdomTree commodity strategist Nitesh Shah.
“The fundamentals on the ground for copper are really pretty strong, but we’ll probably have a lot of choppiness in base metals prices. My worry is that any time you get good economic news, people may start pricing in that Fed pivot farther away.”
The dollar index slid to a one-week low after the Fed minutes were released and held its losses on Thursday, making metals less expensive for non-dollar holders.
Also lifting prices was news that China’s biggest commercial banks have pledged at least $162 billion in fresh credit to property developers in a coordinated effort to support the embattled sector.
“Metals are higher from Chinese banks’ pledge for loans and interest-free terms to other banks for re-lending to developers,” one Singapore-based metals trader said.
Analysts expect China’s copper demand to rise strongly in 2023, boosted by a booming electric vehicle sector and rising investment in renewable power projects.
Among other metals, LME aluminum slipped 1% in official activity to $2,373 a tonne, but nickel added 0.2% to $26,350, zinc was up 0.2% at $2,911, lead gained 1.5% to $2,139 and tin climbed 1.2% to $22,300.
For the top stories in metals and other news, click or (Reporting by Eric Onstad Additional reporting by Brijesh Patel in Bengaluru Editing by David Goodman)