LONDON: Copper prices touched their highest levels in three weeks on Friday amid renewed supply concerns and after US central bank authorities signalled slower interest rate rises.
The metal mainly used in power and construction has a tight supply backdrop, with inventories sliding and miners scaling back production plans.
Three-month copper on the London Metal Exchange (LME) climbed 1.5% to $7,875 a tonne by 1430 GMT, its highest since July 8 as it remained on course for a sixth straight day of gains.
The US economy unexpected contracted in the second quarter, data showed on Thursday, which could deter the Federal Reserve from continuing to increase interest rates aggressively to battle inflation.
That helped to dampen the dollar index on Friday, which fell to its lowest since July 5, but it recovered later in the day.
A weaker US currency makes dollar-priced commodities cheaper for buyers using other currencies, bolstering prices.
“We’ve got a mechanical rate-related bounce in commodities right now...this week the Fed recognised slowing US growth, so its rate hike cycle’s slowing,” said Tom Price, head of commodities strategy at Liberum.
“But I don’t think that makes the outlook any better. If the US economy really is under pressure, that’s inherently bearish for commodities. Meanwhile, over in China - the world’s biggest commodity consumer - growth’s deteriorating further.” Price said that, after the current “mechanical bounce” loses steam, commodities will remain under pressure in the coming months.
Copper’s robust performance recently has been helped by worries over mine supply.
Copper output in Chile, the world’s largest producer of the metal, fell 4.7% year on year in June, data showed on Friday.
Miner and trader Glencore on Friday cut its full-year copper output guidance, adding to a string of other miners trimming production estimates.
The most-traded September copper contract on the Shanghai Futures Exchange ended daytime trading 1.7% up at 60,100 yuan ($8,928.70) a tonne.
In other LME metals, zinc and nickel were the top performers, jumping 4.4% to $3,300 a tonne and 5.7% to $23,180 respectively, both four-week peaks.
Aluminium was little changed at $2,456.50, lead gained 1.4% to $2,025 and and tin advanced 1.4% to $24,700.
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