Comex copper price bounces back but dollar caps rise

Comex copper prices were in positive territory on Monday although the supply/demand backdrop is unchanged and a robust dollar is preventing a major surge.

Copper for December settlement on the Comex division of the New York Mercantile Exchange gained 2.9 cents or 1.2% to $2.5380 per pound. Trade has ranged from $2.4710 to $2.5990 so far.

Comex gold for December delivery slipped $2.50 or 0.2% to $1,221.80 per oz. Earlier, the contract touched $1,212.0 per oz, the lowest since June 2.

Last week, several metals including copper hit fresh 2016 highs thanks to a jump in Chinese investment activity and hopes that Donald Trump’s administration will introduce a trillion-dollar infrastructure plan.

But the macroeconomic landscape has changed little and Trump’s volatile nature has rattled markets since he won last week’s election.

“Over the next 1-3 months, we have doubts about the sustainability of the rally,” Metal Bulletin analyst Boris Mikanikrezai said. “Indeed, upward pressure seems to have been chiefly driven by speculative buying, which is unjustified given the absence of tightness in the forward fundamentals.”

The dollar index this morning surged to its strongest since December last year at 100.05, buoyed by expectations of larger fiscal spending and higher inflation when Trump takes office next year.

The greenback was also helped by Federal Reserve vice chairman Stanley Fischer’s comments on Friday that the Fed is readying to raise interest rates again because it appeared reasonably close to achieving both its inflation and its employment goal, Credit Suisse noted on Monday.

Some 85% of market participants expect the Fed to raise rates next month – a full calendar year after it last did so hiked after initially targeting four increases for 2016.

“Trump’s proposed policies are causing turmoil in emerging markets and higher inflation could prompt the Federal Reserve to accelerate the pace of rate hikes,” Credit Suisse added.

In Chinese data, industrial production rose 6.1% year-on-year in October, close to the expected 6.2%, and fixed asset investment increased 8.3% year-on-year in January-October, also close to the forecast of 8.2%. Retail sales, however, grew 10.0% year-on-year in October, below consensus of 10.7%.

There is no scheduled data from the US today but retail sales, manufacturing figures and business inventories are slated for release on Tuesday.

Meanwhile, in European markets, Germany’s DAX and France’s CAC-40 were up 0.3% and 0.2% respectively while the dollar strengthened by 0.8% to 1.0774 against the euro.

In other commodities, light sweet crude (WTI) oil futures on the Nymex declined 77 cents or 1.7% to 43.38 per barrel, while Comex silver for December settlement was recently trading at $17.200 per oz, down 18.2 cents.

(Additional reporting by Ewa Manthey, editing by Mark Shaw)

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