Copper plates are prepared for continued transport on a horse-drawn carriage operated by Mopani Copper Mines Plc at the Mufulira Refinery in Mufulira, Zambia, Friday, May 6, 2022.
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Copper prices rose to a near six-week high on Tuesday, supported by fresh investor demand and optimism about the possibility of imminent U.S. interest rate cuts.
Copper prices for September delivery briefly touched $4.3065 a pound in New York on Tuesday, hitting their highest level since July 18, when copper prices reached as high as $4.4280. The contract was last up 0.4% at $4.2365.
Three-month copper london metal exchangeMeanwhile, prices rose 1.3% to about $9,406 per ton.
Prices for the red metal have been climbing steadily in recent weeks, retracing losses after hitting four-month lows in early August.
Ole Hansen, head of commodity strategy at Saxo Bank, said copper’s recent gains have been driven in part by new demand from hedge funds, which had cut their exposure to the base metal “during the recent deep 24% correction” of exposure.
“We believe the worst of the correction is behind us, but demand fundamentals need to improve before copper can stage a stronger recovery, which may be hampered by lower financing once the (Federal Open Market Committee) begins its long-awaited rate cuts. Cost replenishment inventory support.
“Until then, traders will continue to look for signs of improvement, particularly a reduction in high inventory levels in warehouses monitored by the three major futures exchanges,” he added.
Optimistic about rate cut
Late last week, Fed Chairman Powell This intensified people’s high expectations for an interest rate cut at the U.S. central bank’s meeting on September 18.
Powell said on Friday that “the time has come for policy adjustments” but declined to provide precise guidance on the timing or magnitude of a rate cut.
Copper price is seen Loose monetary policy, likely benefiting from U.S. interest rate cuts, is expected to ease financial pressure on manufacturers and construction companies.
A worker bundles copper wire before loading it onto a truck in Huai’an, Jiangsu Province, China.
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Copper demand is widely considered an indicator of the health of the economy. The red metal is vital to various sectors, including the energy transition ecosystem, and is integral to the manufacture of electric vehicles, power grids and wind turbines.
Wall Street banks have been bullish on the outlook for copper prices this year, citing supply risks and improving demand for the energy transition metal.
In fact, Citi analysts said in early April that the second secular bull market in copper this century is underway — some 20 years after the first such cycle.
“From a technical perspective, the rally has paused after encountering resistance at the early August highs of $4.22 per pound in New York and $9,320 per ton in London. A breakout would extend to $4.31 and $9,500 respectively,” Saxo Bank Hansen said.
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