Prices of copper soared on Friday due to hopes of Fed’s slower rate-hike that could boost the industrial metal’s demand.
With a weaker dollar due to the softer-than-expected data, the greenback-priced metal became cheaper for buyers who use other currencies.
On London Metal Exchange, three-month copper was up to $8,398.5 from $8.227 a ton yesterday, its highest since June 6. Meanwhile, the most-traded December copper rose to a four-month high of 68,000 yuan, $9,503.58 a ton, at 2% on the Shanghai Futures Exchange.
According to an analyst, “This gives the Fed its excuse to start conditioning markets for a turn in policy. That could be a lot quicker now.”
US consumer prices in October showed less upward movement pushing only by 8% below for the first time in eight months. This indicates that inflation might be slowing down and would give Fed a reason to scale back its price hikes.
Chinese Demand’s Effects on Copper Price
China, one of the world’s largest copper consumers, saw an increase of more than 3% in copper demand despite its property market meltdowns and Covid lockdowns. This demand pushed concerns about low copper supply, which in turn supported its price.
According to analysts, the recent price hike was a result of speculations that China may ease Covid restrictions.
The portfolio manager of Third Avenue Value Fund, Matthew Fine, noted that easing the zero-Covid policies would probably have a “large and immediate impact on sentiment,”
“Any creeping notion that a global recession may not occur, or an acceptance that life will go on even if a recession does occur, could push copper prices far higher given the existing tightness of the copper market and lack of inventories,” Fine added.
Global copper supplies remain tight, with copper inventories on LME warehouses dropping 950 tonnes, which trimmed the headline stocks to their lowest in 7-1/2 months at 80,025 tonnes.