Copper prices touched their lowest level in a month on Thursday (September 21) as the US dollar strengthened.
Early in the day, LME copper hit $6,427.50 per tonne, its weakest point since mid-August. Prices closed down 0.7 percent in London, at $6,480.
The US Federal Reserve’s latest two-day meeting ended on Wednesday (September 20) with a statement signaling one more interest rate hike in 2017 and up to three more increases next year. The central bank will also work to reduce its balance sheet.
On the back of the news, the US dollar rebounded, making commodities priced in dollars more expensive for investors using other currencies.
“The losses are mostly currency driven. The dollar was the main culprit behind the August gains so now to see a higher dollar is pounding all the metals,” said Gianclaudio Torlizzi, a partner at metals consultancy T-Commodity.
But he noted that copper prices could rise moving forward. “On the fundamental side demand is not booming (but) supplies have been reduced, so we don’t need such strong demand to put the metal in deficit,” he commented.
In fact, the global world refined copper market showed a 70,000-ton deficit in June compared with a a 50,000-ton deficit in May.
Signs that a cooling property market in top-consumer China is not derailing economic growth also supported copper prices this week. The Asian country is also the third-largest copper-producing country.
Despite Thursday’s fall, copper has been surging since the beginning of the year, and is up more than 16 percent since January. Earlier this month, prices hit their highest level in three years; however, at the time many analysts said they saw the rally as “overhyped.”
“The price pretty much got overstretched, despite fundamentals being somewhat supportive,” said Rob Haworth, a senior investment strategist at US Bank Wealth Management in Seattle.
Market watchers polled by FocusEconomics gave mixed copper price predictions for the last months of 2017. Looking ahead to the next few months, they estimate that the average copper price for Q4 2017 will be $5,870.
The most bullish forecast for the quarter comes from ABN AMRO (AMS:ABN), which is calling for a price of $6,674; meanwhile, Euromonitor International is the most bearish with a forecast of $4,899.
To help investors learn more about what factors may impact copper prices during the last months of 2017, the Investing New Network recently interviewed Paul Benjamin, research director at Wood Mackenzie. Click here to read the full article.
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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.