Copper futures rallied as much as 1% on Tuesday after the European Union made significant progress in its massive stimulus package. Copper prices are also benefiting from a weaker US dollar that has been hammered as of late amid broader market optimism and sufficient dollar liquidity in the global economy. Could the industrial metal soon top $3?
August copper futures rose $0.031, or 1.06%, to $2.9465 per pound at 16:11 GMT on Tuesday on the New York Mercantile Exchange. The red metal has soared more than 31% since April, lifting its year-to-date gain to nearly 6%. Copper prices have not traded this high since February 2019.
The main driver of copper’s ascent is Europe’s $857 billion Recovery Fund, an initiative of grants and loans to 27 member states and dozens of sectors in dire need of funding. Most of the funding will come from capital markets, with a scheduled date of full repayment in 2058. Europe is also set to approve another $1 trillion budget to help fund other stimulus and relief efforts in the eurozone.
Copper prices usually benefit from these types of spending packages since they typically focus on infrastructure spending, and the industrial metal is essential for construction and manufacturing.
A falling greenback is another big factor for copper on Tuesday. The US Dollar Index, which measures the buck against a basket of currencies, fell 0.52% to 95.332. A weaker greenback is good for dollar-denominated commodities because it makes it cheaper for foreign investors to purchase.
In industry news, mining giant BHP released its copper output forecast for the fiscal year 2020-2021. It anticipated that production slump as much as 14% to 1.48 million metric tons. Last year, production levels topped 1.72 million metric tons. It cited a reduction in workforce levels amid the coronavirus pandemic as one of the chief causes of the decline in output.
BHP also projects nickel production will increase by 6% to 19%.
In other metal markets, August gold futures surged $23.50, or 1.2931%, to $1,840.90 per ounce. September silver futures soared $1.223, or 6.06%, to $21.41 an ounce. September platinum futures rose $55.20, or 6.43%, to $913.10 per ounce. September palladium futures spiked $110.30, or 5.23%, to $2,219.70 per ounce.