LONDON: Copper edged lower on Friday after touching its highest level in two months as a firm dollar and producer selling offset optimism about further stimulus from top metals consumer China.
Three-month copper on the London Metal Exchange was down 0.2% at $9,499 per metric ton by 1615 GMT, having earlier touched $9,599.50, the highest since July 18.
US Comex copper futures dropped 0.6% to $4.27 a lb. Copper pared gains after selling by miners, profit taking ahead of the weekend and a firmer dollar index, which makes commodities priced in the US currency more expensive for buyers using other currencies.
The US central bank kicked off its monetary policy easing cycle on Wednesday with a larger-than-usual half-percentage point reduction, lifting global risk assets.
“China’s central bank has largely held off doing broad-based stimulus because of rate differentials, but now that obstacle has been removed, it can start stimulating,” said Nitesh Shah, commodity strategist at WisdomTree.
China unexpectedly left benchmark lending rates unchanged at the monthly fixing on Friday, but analysts said a rate cut would likely be included in a larger policy package. LME copper has gained more than 7% since sinking to a three-week low on Sept. 4, but it is still down 14% since hitting a record peak in May.
“There is a risk of a short-term fall-back after having a sentiment-led rally,” Shah added. Also supporting copper were further declines in inventories in warehouses registered with the Shanghai Futures Exchange amid a pick-up in seasonal demand. Data on Friday showed stocks have more than halved since early June. LME aluminium slid 2% to $2,488 a ton as producers took advantage of the recent rally to sell at higher prices, a trader said.
“A producer offer had begun to cap the scale of price gains over the past few sessions,” broker Marex said in a note, referring to aluminium and copper. Among other metals, LME zinc dropped 1.8% to $2,877.50 a ton, lead eased 1.3% to $2,048 while nickel gained 0.8% to $16,470 and tin climbed 0.6% to $32,000.