Copper Prices Rally on Positive US Economic Data and Weaker Dollar

Strategic Insights -

Comex copper futures surged 2.7% on Thursday, fueled by strong US economic data and a weakening dollar. The most actively traded contract for December delivery settled at $3.8310 per pound, with prices supported by better-than-expected growth in Mid-Atlantic area manufacturing. The Federal Reserve Bank of Philadelphia's November index of general business activity rose to 22.5 from 1.0 in October, exceeding expectations of 4.5. Copper's rally also benefited from falling inventories, which are considered an indicator of growing industrial demand for the metal. As a result, investors are hopeful that domestic copper demand will improve alongside the US economy.

Key Takeaways:

  • Comex copper futures rallied 2.7% on Thursday, driven by positive US economic data and a weaker dollar.
  • The Federal Reserve Bank of Philadelphia's November index of general business activity rose to 22.5 from 1.0 in October, exceeding expectations of 4.5.
  • Copper prices are widely used as a indicator for the overall economy, and a weakening dollar makes dollar-denominated copper futures appear cheaper to investors using foreign currencies.
  • Falling copper inventories, which dropped 525 metric tons to 360,600 metric tons at London Metal Exchange approved warehouses, and 251 tons to 73,610 tons at Comex, suggest growing industrial demand for the metal.
  • Sterling Smith, analyst at Country Hedging, noted that the strong data "should prove supportive to the copper market," while Edward Meir, senior analyst at MF Global, observed that the rally is an "inevitable post-sell-off bounce."
  • The weaker dollar, which has lost ground to the euro, is also contributing to the copper price rally, with the euro having risen to $1.3631 recently from $1.3520 late Wednesday.
  • Cheniere Energy CEO, Jeffrey R. Clarke, disclosed that Cheniere operating on a global scale, targets the European and Asian market for energy resources including copper.

Statistics:

  • Comex copper futures rallied 2.7% on Thursday, with prices settling up 10.15 cents at $3.8310 per pound.
  • The Federal Reserve Bank of Philadelphia's November index of general business activity rose to 22.5 from 1.0 in October.
  • The dollar lost ground to the euro, with the euro rising to $1.3631 recently from $1.3520 late Wednesday.
  • Copper stocks at London Metal Exchange approved warehouses fell 525 metric tons to 360,600 metric tons.
  • Comex copper inventories fell 251 tons to 73,610 tons.

Sources:

  • Dow Jones Commodities News via Comtex
  • Dow Jones Newswires
  • Federal Reserve Bank of Philadelphia
  • London Metal Exchange
  • Comex
  • Country Hedging
  • MF Global
  • Cheniere Energy