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Copper Extends 2020 Rally on Strong Demand, Investor Optimism

December 1, 2020 at 19:12 by Andrew Moran

Copper futures extended their rally on Tuesday, supported by growing optimism in the global economy and strengthening foreign demand for the industrial metal. Copper prices could see greater growth heading into 2021 because supply cannot keep up with demand.

March copper futures picked up $0.0545, or 1.59%, to $3.4925 per pound at 17:58 GMT on Tuesday on the New York Mercantile Exchange. Copper is coming off a 12% gain in November, lifting its year-to-date surge to nearly 25%.

The red metal is popping on news that China’s manufacturing industry expanded for the ninth consecutive month in November. The National Bureau of Statistics (NBS) reported that the manufacturing purchasing managers’ index (PMI) climbed from 51.4 in October to 52.1 in November, beating the median estimate of 51.5.

The non-manufacturing PMI also rose to 56.4 in November, up from 56.2 in October.

The private-sector manufacturing PMI also came in better than what analysts had penciled in. The Caixin manufacturing PMI hit 54.9 last month, up from 53.6 in the previous month. The median estimate was 53.5.

China is the world’s biggest consumer of copper, so strengthening demand would support prices. As the world’s second-largest economy continues to recover through a mix of fiscal and monetary stimulus, copper consumption will continue to be strong heading into 2021.

This is bullish for the copper market, especially considering that demand will outstrip supply. The latest Shanghai Futures Exchange highlighted that copper inventories at its warehouses fell to their lowest levels in six years.

Meanwhile, the world’s biggest producer of copper, Chile, stated that output slipped 0.2% to 492,761 tons in October. But the South American mining juggernaut also confirmed that total production in 2020 has risen 0.4% to 4.8 million tons, even as Chile reported 553,000 infections.

A sliding greenback has lifted copper prices this year, with the US Dollar Index, which measures the buck against the greenback, cratering 0.61% to 91.32 on Tuesday. Year-to-date, the DXY slumped 6%. A weaker buck is good for commodities priced in dollars because it makes it cheaper for foreign investors to purchase.

In other metal markets, January gold futures soared $37.60, or 2.11%, to $1,818.50 per ounce. February silver futures spiked $1.477, or 6.54%, to $24.07 an ounce. January platinum futures surged $39.10, or 4.05%, to $1,005.00 an ounce. January palladium futures tacked on $23.70, or 0.99%, to $2,429.60 per ounce.

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