Copper futures are trading higher to kick off the trading week, buoyed by strong Chinese economic data and a sliding US dollar. The red metal had topped $3.10 in intraday trading before paring its gains that had been caused by concerns of the resurgence of coronavirus cases. With the Chinese economy recovery moving ahead, are copper prices on a permanent upward trajectory for the rest of 2020?
November copper futures picked up $0.012, or 0.39%, to $3.0795 per pound at 19:07 GMT on Monday on the New York Mercantile Exchange. Copper enjoyed a weekly gain of about 0.5% last week, raising its year-to-date rally to above 10%.
Copper prices are rising on decent economic numbers coming out of Beijing. According to the National Bureau of Statistics (NBS), the third-quarter gross domestic product (GDP) advanced 4.9%, up from 3.2% in the second quarter. While it did fall short of the market expectation of 5.2%, the numbers are better than most of its regional neighbors.
Retail sales climbed at an annualized rate of 3.3% in September, up from the 0.5% jump in August. The median estimate was 1.8%. The marketplace witnessed greater sales for office supplies, new motor vehicles, medicine, apparel, and food and beverage. But retail trade saw a drop in sales for home appliances, furniture, telecommunications, and oil and oil products.
Industrial production surged at a better-than-expected 6.9% year-over-year, while industrial capacity utilization increased to 76.7% in the July-to-September period.
The unemployment rate fell from 5.6% in August to 5.4% in September.
The People’s Bank of China (PBoC) also reported that fixed-asset investment rose 0.8% year-to-date from the same time a year ago in September. The central bank also noted that foreign direct investment (FDI) rose 5.2% YoY last month.
Metal investors have been focusing on Chinese economic data because the nation is the world’s largest consumer of copper. If the world’s second-largest economy is recovering in the aftermath of the coronavirus pandemic, demand for copper would remain robust, which would be bullish for prices.
Xiao Fu, head of commodity market strategy at Bank of China International in London, told Reuters that the fundamentals are strong, but there is still some uncertainty.
For copper, the fundamentals have been quite resilient, primarily due to China’s recovery, and supply has been a bit tighter as well. But there’s still lots of uncertainty on the macro front, including surrounding the U.S. election and concerns about the rest of the world’s recovery.
The greenback is reversing its gains from last week. The US Dollar Index, which gauges the greenback against a basket of currencies, tumbled 0.27% to 93.43, from an opening of 93.71. A lower buck is good for dollar-denominated commodities because it makes it cheaper for foreign investors to acquire.
In other metal markets, December gold futures slipped $1.60, or 0.0839%, to $1,904.80 per ounce. November silver futures shed $0.045, or 0.18%, to $24.36 an ounce. December platinum futures dropped $15.70, or 1.81%, to $853.60 per ounce. December palladium futures tacked on $6.80, or 0.29%, to $2,349.10 an ounce.