Copper futures slumped on Tuesday amid a strengthening US dollar and uncertainty ahead of this week’s central bank meetings. Investors reduced some of their bullish positions, enjoying early profits after the industrial metal recently hit a near decade-high peak. Can the red metal kick off another massive rally following the central bank policy get-togethers?
April copper futures tumbled $0.0755, or 1.82%, to $4.065 per pound at 17:06 GMT on Tuesday on the New York Mercantile Exchange. The industrial metal has slipped 0.25% over the last week, paring its March rally to below 7%. However, copper prices are still up more than 15% year-to-date.
On Wednesday, the Federal Reserve will finish its two-day Federal Open Market Committee (FOMC) policy meeting. Investors are waiting for guidance from the US central bank, which explains the quiet performance in the broader financial markets. The Bank of England (BoE) and the Bank of Japan (BoJ) will also hold meetings this week.
Officials are likely to leave interest rates and their quantitative easing campaigns on hold. But they should comment on rising inflation levels, economic growth outlooks, and the future of public policy.
Should they decide on maintaining or expanding easing efforts, it could be good news for copper prices since they have been following trends in the overall stock market.
That said, the overall fundamentals are positive for the red metal. Demand is strong, particularly in the renewables sector, where copper is a critical component for electric vehicles. Foreign imports, particularly in China, have remained impressive so far this year. In the first two months of 2021, Beijing’s copper imports surged 4.65% year-over-year to 884,009 tons.
Global supplies are also tight, with consumption continuing to outpace inventories.
The one hurdle for copper might be a strengthening greenback. The US Dollar index (DXY), which measures the buck against a basket of currencies, has rallied 2.2% year-to-date. A stronger buck is bad for commodities priced in dollars because it makes it more expensive for foreign investors to purchase.
In other metal markets, April gold futures rose $1.90, or 0.11%, to $1,731.10 per ounce. May silver futures plunged $0.238, or 0.89%, to $26.055 per ounce. April platinum futures added $10.50, or 0.87%, to $1,220.00 an ounce. April palladium futures spiked $118.30, or 4.98%, to $2,492.00 an ounce.