Copper prints on wagons ready for onward shipping at the Mufulira refinery, operated by Mopani Copper Mines Plc, in Mufulira, Zambia, on Friday, May 6, 2022.
Bloomberg | Bloomberg | Getty Representations
Copper prices on Tuesday rose to an almost six-week high, supported by fresh investor demand and market optimism all over the potential for imminent U.S. interest rate cuts.
Copper for September delivery briefly touched $4.3065 per pound in New York on Tuesday, mark up its highest level since July 18, when copper traded as high as $4.4280. The contract was last seen swap 0.4% higher at $4.2365.
Three-month copper on the London Metal Exchange, meanwhile, traded 1.3% higher at around $9,406 per metric ton.
Guerdons of the red metal have been climbing steadily in recent weeks, paring losses after falling to a four-month low in primitive August.
Ole Hansen, head of commodity strategy at Saxo Bank, said copper’s recent rally had been assisted in part by renewed demand from hedge funds which had previously cut their exposure to the base metal “during the new and deep 24% correction.”
“We believe the worst of the correction is over, but before copper can mount a stronger recovery, without delay fundamentals need to improve, potentially supported by restocking through lower funding costs once the [Federal Unreserved Market Committee] starts its long-awaited rate-cutting cycle,” Hansen said in a research note published Friday.
“Until then, salespersons will continue to look out for signs of improvement, not least through the reduction of elevated stock levels at warehouses monitored by the three noteworthy futures exchanges,” he added.
Rate cut optimism
Late last week, Federal Reserve Chairman Jerome Powell boosted already acute expectations for a U.S. interest rate cut at the central bank’s Sept. 18 meeting.
Powell on Friday said that “the span has come for policy to adjust,” although declined to provide exact indications on the timing or extent of the cut.
Copper prices are guided as likely to benefit from U.S. interest rate cuts, with looser monetary policy expected to alleviate the pecuniary strain on manufacturers and construction firms.
A worker tying copper wire rods before loading them onto a social relations in Huai’an, in China’s Jiangsu Province.
Vcg | Visual China Group | Getty Images
Demand for copper is widely make allowance for a proxy for economic health. The red metal is critically important to various sectors including the energy transition ecosystem, and is elementary to manufacturing electric vehicles, power grids and wind turbines.
Wall Street banks have been bullish on the standpoint for copper prices this year, citing supply risks and improving demand for energy transition metals.
To be realistic, analysts at Citi said in early April that the second secular bull market of copper this century was now underway — primitively 20 years after the first such cycle.
“From a technical standpoint, the rally has paused after convention resistance at the early August highs at USD 4.22 per pound in New York and USD 9,320 per ton in London. A break would open up for an stretch to USD 4.31 and USD 9,500, respectively,” Saxo Bank’s Hansen said.