Copper Retreats From Four-Month High as COVID-19, Fed Spook Markets

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Copper futures are retreating from their best levels in more than four months as fears about a second coronavirus wave are spooking financial markets. The industrial metal had been rallying on optimism over economies reopening and higher demand, but COVID-19’s presence is still affecting the broader market, which does not bode well for prices.

July copper futures tumbled $0.0585, or 2.2%, to $2.598 per pound at 16:20 GMT on Thursday on the Comex division of the New York Mercantile Exchange. Despite the significant drop, the red metal is still up about 4.5% this week. Year-to-date, it is down more than 7%.

US financial markets are taking a beating on Thursday. The Dow Jones Industrial Average crashed more than 1,000 points, the Nasdaq Composite Index fell more than 300 points, and the S&P 500 shed about 3%. But what is happening? Investors have been frightened by the coronavirus and the Federal Reserve.

In the US, confirmed cases of COVID-19 officially topped two million, and 21 states have reported significant increases. This has triggered concerns of a second wave, which would affect the world’s largest economy and erase many of the gains enjoyed since the bottom at the end of March.

On Wednesday, the US central bank completed its two-day Federal Open Market Committee (FOMC) policy meeting, and the Eccles Building presented a bleak assessment of the economy. The Fed left interest rates unchanged and stated that it would not raise rates until 2022. It also forecast that the economy would contract by 6.5% this year, but then rebound 5% in 2021.

Traders poured into traditional safe-haven assets, such as gold and the US dollar, to shield themselves from the largest one-day drop in two months. Is this the dead cat bounce bears have warned about in recent weeks?

In industry news, Chile announced that its copper output advanced at an annualized rate of 2.6% in April as the nation’s top three producers reported growth. The national copper commission confirmed that the South American nation produced 470,600 tons in April, up from 458,600 tons in April 2019. Unlike many of its neighbors, Chile refrained from implementing a national lockdown and quarantine strategy to handle the virus outbreak. However, a growing number of unionized workers have threatened to walk off the job to institute a self-imposed quarantine after a member passed away from COVID-19.

In other metal commodities, August gold futures picked up $17.30, or 1.005%, to $1,738.00 per ounce. July silver futures tacked on $0.065, or 0.37%, to $17.86 an ounce. July platinum futures shed $24.60, or 2.91%, to $821.40 per ounce. July palladium futures dropped $24.00, or 1.24%, to $1,906.80 an ounce.

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