Copper and industrial metals largely held Tuesday’s slump as a stronger dollar and the Federal Reserve’s hawkish stance weighed on the demand outlook.
Copper was slightly higher on the London Metal Exchange, after losing 2% on Tuesday as a bearish turn in equity markets weighed on sentiment. The likelihood of higher rates to counter inflation is a headwind for all risk assets, while a rising dollar compounds the impact on commodities priced in the greenback.
New Federal Reserve Chair Kevin Warsh set a hawkish tone at his first rate-setting meeting last week, where policymakers signaled growing support for higher borrowing costs while leaving rates unchanged. The outlook jolted investors and offset the positive impact from an interim US-Iran peace deal that’s allowed commercial vessels to move in greater numbers through the Strait of Hormuz.
“Base metals trading is currently dominated by Fed monetary policy,” said Gao Ying, an analyst with Shuohe Asset Management Co. “There are hardly any speculative long positions in base metals at the moment.”
Copper gained 0.1% to $13,378 a ton as of 9:24 a.m. in London. Aluminum extended losses after falling 3.9% on Tuesday to a three-month low.
Still, one bright spot for bullion is the continued strength of central-bank demand. The monetary institutions added to their holdings at the fastest pace in more than a year in the first quarter, and survey data indicates they intend to buy more.
“The one pillar which remains strong is central bank demand, and we expect this to be the case for some time to come,” Deutsche Bank wrote.
Spot gold traded at $3,970.10 an ounce at 2:24 p.m. London time, down 3.6%. Silver fell 5% to $58.52 an ounce. Platinum and palladium saw similar falls, while the Bloomberg Dollar Spot Index rose 0.4%, hitting the highest since November.
Written by: Bloomberg News
The post “Copper Holds Losses as Dollar and Hawkish Fed Pressure Metals” first appeared on Bloomberg