Copper futures climbed over 2% last week, reaching a one-week high amid signs of improving demand from top consumer China. Recent data indicated declining copper inventories in Shanghai Futures Exchange warehouses, reversing the increases seen in July.
Copper prices also gained from a broad rebound in risk assets, including global stock markets, commodities, and risk-sensitive currencies. This rally persisted despite a mixed US inflation report, which solidified expectations of a smaller 25 basis point rate cut by the Federal Reserve next week.
On Friday, copper prices hit a two-week high and were on track for their strongest weekly performance since July, supported by a weaker dollar and optimism over economic stimulus in China. Three-month copper on the London Metal Exchange rose 0.9%, trading at $9,297.50 per metric ton, after touching a high of $9,314.50, its highest level since August 30.
The U.S. dollar was under pressure, making dollar-priced metals more attractive to buyers using other currencies, as the U.S. Federal Reserve is widely expected to begin cutting interest rates next week. Meanwhile, China’s central bank announced on Friday that it would focus on expanding domestic demand, particularly through boosting consumption. Although new bank loans in China for August missed expectations, total social financing, a key indicator of future metals demand, exceeded forecasts.
Copper, which is crucial in the power and construction sectors, has dropped 16% since a May rally pushed prices to a record high of $11,104, driven by speculative buying over potential future shortages. The price decline, largely due to unwinding investor positions, has spurred increased buying and restocking in China ahead of the country’s long October holiday.
Copper inventories in Shanghai Futures Exchange warehouses have fallen 45% over the past three months to 185,520 tons, the lowest level since February, and further bolstering sentiment.
This week, central bank policies from the US, UK, and Japan are likely to drive volatility in the copper market.
Copper prices posted a weekly gain of over 2.5% last week, reaching a high of 805.30 before settling at 802.20. Since July 8, 2024, prices have been in a downtrend, retreating from the peak of 878.20 to a low of 765.10 on August 5, 2024. On the weekly chart, prices are forming a bullish harami candlestick pattern, indicating the potential for further upside movement.
However, for this bullish outlook to materialize, prices need to break above 806.20 to test the 815-818 range. Otherwise, any dip toward the 795-790 level is expected to attract buying interest.
On the downside, immediate support is seen at 778, with further support at 766.
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