LONDON: Copper prices hit a six-week high on Thursday as bets the US Federal Reserve will ease the pace of interest rate rises pushed up riskier assets and weakened the dollar, making dollar-priced metals cheaper for buyers with other currencies.
US data on Wednesday and Thursday suggested inflation may be peaking, reducing the need for rate increases that would stifle economic activity and metals demand.
The data bolstered faith among investors that rebounds in stocks and bonds will persist, though Fed policymakers said they would continue to tighten policy until price pressures are fully broken. Benchmark copper on the London Metal Exchange (LME) was up 1.2% at $8,185 a tonne at 1559 GMT after reaching $8,199, the highest since July 1.
Prices of the metal used in power and construction are up 17% from a low in mid-July but still down 25% from a peak in March due to slowing economic growth and demand.
“The peak inflation thesis is pushing base metals up,” said Gianclaudio Torlizzi, partner at consultants T-Commodity.
He said signs of tight supply in China were also lifting copper. “The physical indicators are pretty bullish. I think the price will continue to move up,” he said.
Stockpiles of copper in Chinese exchange and bonded warehouses have been falling and import premiums are their highest since December. Chinese auto sales surged in July as COVID-19 restrictions eased, though sales for the first seven months of the year were still down 2% year-on-year.
China’s copper cathode output rose slightly in July.
The threat of more COVID-19 lockdowns looms over the market, however, with several Chinese cities imposing fresh restrictions to contain flare-ups in case numbers.
Most speculators are betting copper has further to fall despite its recent rebound.
In other metals, LME aluminium was up 1.4% at $2,525 a tonne, zinc added 1.8% to $3,672, nickel climbed 4.8% to $23,565, lead rose 1.2% to $2,200 and tin advanced 3% to $25,285.