Copper Futures Plummet as Investors Flock to Safety of U.S. Dollar

Strategic Insights -

Copper prices dropped sharply on the New York Mercantile Exchange as investors sold the metal and bought the U.S. dollar, driven by concerns over the economic recovery and a perceived shift in monetary policy. This move was triggered by the Federal Open Market Committee's acknowledgment that the economy is picking up steam, while keeping interest rates unchanged. The dollar also gained support from a credit-rating downgrade for Greece and the first decline in six months for U.K. retail sales. The greenback found extra support as participants bought back previously sold positions, further pushing copper prices down.

Key Takeaways:

  • Copper futures fell 7.75 cents to settle at $3.1280 a pound on the Comex division of the New York Mercantile Exchange.
  • The ICE Futures U.S. Dollar Index was up more than 1%, while the Dow Jones Industrial Average was off more than 100 points.
  • Investors are concerned that loose U.S. monetary policy, which has supported commodities, may be ending sooner than expected.
  • Warehouse stocks of copper stored in London Metal Exchange-monitored warehouses rose 1,300 metric tons to 474,575 metric tons.
  • Inventories of copper stored in COMEX-monitored warehouses rose 734 short tons to 94,489 short tons.
  • Bob Haberkorn, a senior market strategist with Lind-Waldock, stated that the metal was continuing to trade as a risk play.
  • Ralph Preston, a senior market analyst with Heritage West Financial, noted that the dollar is muscling higher and that investors are buying back previously sold positions.

Statistics:

  • Copper prices fell 7.75 cents to settle at $3.1280 a pound.
  • The ICE Futures U.S. Dollar Index was up 1% on the day.
  • The Dow Jones Industrial Average fell over 100 points.
  • Warehouse stocks of copper stored in London Metal Exchange-monitored warehouses rose to 474,575 metric tons.
  • Inventories of copper stored in COMEX-monitored warehouses rose to 94,489 short tons.
  • The Federal Open Market Committee's acknowledgment that the economy is picking up steam was announced on Wednesday afternoon.

Sources:

  • Dow Jones Commodities News via Comtex
  • New York Mercantile Exchange
  • ICE Futures U.S.
  • Lind-Waldock
  • Heritage West Financial
  • Matt Whittaker, Dow Jones Newswires