Copper Inches Higher With Dollar Falling, Bullish Growth Forecast
January 22 2018 - 11:18AM
Dow Jones News
By Amrith Ramkumar and David Hodari
Copper prices inched higher Monday, boosted by a falling dollar
and another bullish global economic growth projection.
Copper for March delivery climbed 0.3% to $3.1970 a pound on the
Comex division of the New York Mercantile Exchange. Prices have
fallen slightly from their nearly four-year highs hit late last
year, but some investors expect the industrial metal to keep
climbing, supported by strong global demand and supply
disruptions.
Speculative action in the copper market has recently reached a
balance, according to William Adams, head of research at
FastMarkets.
"While the other base metals have worked higher so far this
year, copper came off in early January and has since gone sideways.
There's not much bearishness and the falls [in price] are being
supported [by buying]," Mr. Adams said.
While inventories in London and Shanghai have risen in recent
weeks, speculative bullishness and improving predictions for the
health of the Chinese economy in 2018 mean that relatively high
copper prices "can continue to be the case," Mr. Adams said.
Many analysts link global economic growth and demand for copper
and other base metals because the raw materials are used to
construct everything from airplanes to smartphones. On Monday, the
International Monetary Fund said world output, adjusted for
inflation, will grow 3.9% a year in 2018 and 2019, the strongest
since 2011, and an upward revision of 0.2 percentage points from
the IMF's forecasts in October.
"It certainly doesn't hurt, but there are other narratives that
are a little bit stronger," said Tai Wong, head of metals trading
at BMO Capital Markets. Mr. Wong said he thinks the performance of
the Chinese economy and the dollar are more relevant factors
driving the market. China is the world's largest base metals
consumer, while a weaker dollar makes copper and other
dollar-denominated commodities cheaper for overseas buyers.
With some investors already anticipating strong Chinese economic
performance and a weaker dollar, some analysts wonder how much
higher copper prices can go after an approximately 25% gain since
the start of June.
"Neither of those story lines have really changed," Mr. Wong
said. "The narratives haven't changed, which is why you see some of
the metals trade sideways."
On Monday, the WSJ Dollar Index, which tracks the U.S. currency
against a basket of 16 others, was down 0.2% following a sixth
consecutive week of losses.
Among precious metals, gold for February delivery swung between
small gains and losses and was recently up less than 0.1% at
$1,333.30 a troy ounce. The dollar's weakness has propelled prices
to their highest level since September, but some analysts have
cautioned that more investors are anticipating two or three Federal
Reserve interest-rate increases this year. Gold struggles to
compete with yield-bearing assets like Treasurys as borrowing costs
rise.
Write to Amrith Ramkumar at amrith.ramkumar@wsj.com and David
Hodari at David.Hodari@dowjones.com
(END) Dow Jones Newswires
January 22, 2018 11:03 ET (16:03 GMT)
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