Copper plates in a wagon ready for delivery at the Mufulira refinery, operated by Mopani Copper Mines Plc, in Mufulira, Zambia, on Friday, May 6, 2022.
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Copper prices on Tuesday rose to a near six-week high, supported by fresh investor demand and market optimism about potential US interest rate cuts.
Copper for September delivery traded at $4,223 a pound in New York, extending gains after reaching its highest level since July 22 in the previous session.
Three-month copper on the London Metal Exchange, meanwhile, also rose to trade around $9,378 per metric ton.
Prices of the red metal have been climbing steadily in recent weeks, giving losses after falling for less than four months in early August.
Ole Hansen, head of commodity strategy at Saxo Bank, said the recent copper rally has been bolstered in part by renewed demand from hedge funds that previously cut exposure to the base metal “during a recent and deep 24% correction.”
“We believe the worst of the correction is over, but before copper can mount a stronger recovery, demand fundamentals must improve, which could be supported by restocking through lower funding costs if the (Federal Open Market Committee) initiates long-awaited rate cuts -wait. cycle,” Hansen said in a research note published Friday.
“Until then, traders will continue to look out for signs of improvement, at least through the reduction of elevated stock levels in warehouses monitored by the three major futures exchanges,” he added.
Optimism lowers rates
Late last week, Federal Reserve Chairman Jerome Powell boosted already high expectations for a US interest rate cut at the central bank’s September 18 meeting.
Powell on Friday said that “the time has come for policy to adjust,” although he declined to give a precise indication of the timing or size of the cuts.
Copper prices look set to benefit from US interest rate cuts, with looser monetary policy easing financial strain on manufacturing and construction firms.
A worker ties copper wire rods before they are loaded onto a truck in Huai’an, in China’s Jiangsu Province.
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Copper demand is considered a proxy for economic health. The red metal is very important to various sectors including the energy transition ecosystem, and is integral to the manufacturing 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 boosting demand for the energy transition metal.
Indeed, analysts at Citi said in early April that the second secular copper market of the century is now underway – some 20 years into the cycle.
“From a technical point of view, the rally has paused after meeting resistance at the height of early August at USD 4.22 per pound in New York and USD 9,320 per ton in London. A break will open for extension to USD 4.31 and USD 9,500, respectively. , “he said Hansen Bank Saxo.
