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Copper Dips on Slumping Growth, Capped by Supply Outlook

April 23, 2019 at 18:02 by Andrew Moran

Copper futures are sliding on Tuesday on slumping economic growth in key markets, including China and the eurozone. But the dip was capped by several bullish supply outlooks that suggest a market deficit could lead to a breakout in copper prices in the coming months. The red metal has had a strong start to 2019, despite the paucity of labor disruptions and significant growth.

May copper futures tumbled $0.0075, or 0.26%, to $2.89 per pound at 17:26 GMT on Tuesday on the Comex division of the New York Mercantile Exchange. Year-to-date, the industrial metal has surged more than 9%, but prices are still trying to leap over the crucial $3 threshold, which they have not done since June 2018.

Copper has taken a hit on reports that the US-China trade deal is not as close to being done as initially reported. Larry Kudlow, the chief White House economic adviser, revealed that a new trade agreement “is not there yet,” adding that progress has been made. For months, the reports have seesawed, giving investors a severe case of whiplash and leaving them confused as to which direction the trade talks are headed.

Meanwhile, data is impacting the red metal. The Chicago Federal Reserve National Activity Index is still in the negative, home sales contracted last month, analysts are anticipating weaker manufacturing in China, and business and consumer sentiment are quite low in the eurozone. These factors indicate that the global economy is either starting or in the middle of a slowdown, a bearish prospect for the red metal because it relies heavily on economic activity.

The one element that is helping the industrial metal is the supply outlook.

In the last month, the consensus has been that the global copper market could slip into a deficit. The Bank of America recently confirmed that supply disruptions over the last 12 months have reduced international inventories by 2%, adding that new production is necessary to offset output losses at existing mines within the next two years.

Other investment houses have a forecast deficit of approximately 300,000 tonnes.

A deficit would drive up the price of copper, particularly if demand prognostications are to be believed.

In other metal commodities, June gold futures fell $4.00, or 0.31%, to $1,273.60 per ounce. May silver futures plummeted $0.20, or 1.34%, to $14.775 an ounce. June platinum futures shed $8.60, or 0.95%, to $893.60 per ounce. June palladium futures tacked on $3.00, or 0.22%, to $1,372.80 an ounce.

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