Copper price pulls back on rising USD www.mining.com
North American stock markets continued to climb on Friday, while the dollar ascended a four-month high, causing downward pressure on precious and base metals prices.
As the Dow, the S&P 500 and the Nasdaq indices all finished up, copper for September delivery on the Comex in New York slumped 2.6 cents or 1.2 percent to $2.23 a pound. Gold was down 0.67% to $1,322.39 an ounce, along with silver, which fell under the $20 an ounce mark to $19.64 – a 0.76% drop.
The kick in stock markets echoed greater confidence in the U.S. economy, measured by the U.S. dollar strength. The greenback ended the week at 97.49 on the dollar index, which is the highest it's been since March 9. The higher dollar comes on the back of data showing less Americans are filing unemployment benefits and that confidence among homebuilders is at a 9.5-year high. A higher dollar makes copper, and other commodities denominated in U.S. dollars, less affordable to purchasers in countries paying with other currencies.
In the United States the flash PMI – an advanced monthly indicator that reflects responses to a survey of purchasing managers in manufacturing – for July was 52.9, bettering expectations. Signs of a resurgent U.S. economy weighed on the copper price – despite the International Copper Study Group saying last week that the copper market had swung to 109,000-tonne deficit in April compared to a surplus in April 2015 – since that would indicate the U.S. Federal Reserve may hike interest rates again.
China, the world's top consumer of the metal, imported 22 percent more copper in the first half of 2016 compared to H1 2015. While that trend would appear to support the copper market, some analysts predict the good news is unlikely to continue for copper. Barclays Bank said on Friday that while copper prices averaged $4,692 a tonne during H1, 6% higher than the bank's forecast, it predicts the red metal will trade at about $4,150 a tonne throughout the second half, due to slowing Chinese demand. That would be 16.4% below the three-month forward prices on Friday of $4,965 per tonne, according to Metal Bulletin.
Copper hit a seven-week high on June 28, driven by growing expectations of monetary stimulus, a weakening US dollar and slightly more steady global markets following the Brexit vote.
Published Date:2016-07-25