Weaker dollar boosts metals
Prices for copper, gold, aluminum and various other metals were mostly higher
Copper prices rose on Tuesday, with a drop in the U.S. dollar allowing the industrial metal to recover from heavy selling last week.
Contracts for September rose 0.9% to $2.6915 a pound at the Comex division of the New York Mercantile Exchange, on track for the highest close in more than a week.
Analysts pointed to the weakness in the dollar, which fell after President Trump criticized the Federal Reserve for raising interest rates. The WSJ Dollar Index, which measures the greenback against a basket of 16 others, fell 0.1%. Prices for gold, aluminum and various other metals were also mostly higher. Gold prices for August climbed 0.3% to $1,190.50 a troy ounce, with the more-active October contract rising 0.1%.
“We’re on an up day today across base and precious metals, with those baskets inversely correlated to the dollar,” said William Adams, head of research at FastMarkets.com. “Base investors are bargainhunting.”
A weaker dollar tends to make commodities denominated in the currency less expensive for other currency holders.
The dollar has risen steadily in recent months, gaining 4% for the year, partly as traders responded to the Fed’s plan to continue raising rates. Higher rates make the dollar more attractive to yield-seeking investors, which has pressured commodities markets in turn.
The cooler dollar on Tuesday allowed metals to recover from heavy selling last week, analysts said, when copper and gold both fell to the lowest point in more than a year.
Elsewhere, BHP Billiton, the world’s largest mining company, reported late Monday a 33% rise in annual underlying profit. The company signaled rising apprehension on the shortterm outlook for the commodities market amid continuing trade tensions between the U.S. and China. That sentiment matches a growing view among analysts that while selling across the metals basket has been overdone—average metals prices have dropped around 20% since early June—there is limited opportunity for value in the sector.
The risk-return profile of metals remains unattractive, said Carsten Menke, commodities research analyst at Julius Baer in a note.
Copper is one example. With China’s demand uncertain— China accounts for more than half of global copper consumption—evaporating supply risks in South America have all but removed an incentive for driving prices higher, Julius Baer’s Mr. Menke noted.
Investors were watching out for macroeconomic headlines and further dollar moves.