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Copper Slumps As Investors Wait for Fed Decision

December 18, 2018 at 16:11 by Andrew Moran

Copper futures are slumping on Tuesday as traders wait for the Federal Reserve to announce a decision pertaining to interest rates. The industrial metal has posted double-digit losses this year, stemming mostly from weakening Chinese demand and a strengthening greenback. Copper started 2018 firmly above $3, but it has remained below that threshold since the beginning of July.

March copper futures tumbled $0.06, or 2.13%, to $2.69 per pound at 14:45 GMT on Tuesday on the Comex Division of the New York Mercantile Exchange. So far this month, the red metal has fallen 2.5%.

On Wednesday, the US central bank will complete its two-day Federal Open Market Committee (FOMC) policy meeting. The market widely anticipates the Fed to pull the trigger on a December rate hike, but traders are looking for language to see where the Eccles Building is headed next year. The Fed has penciled in three rate hikes in 2019, but that seems in doubt on disappointing economic data and plunging equities.

Any announcement will impact the greenback. The buck has been one of the best performing currencies of 2018, a trend that hurts dollar-pegged commodities because it makes it more expensive for foreign investors to purchase. On Tuesday, the US dollar slipped 0.18% to 96.95, but it is still up more than 5% this year.

The US and China are engaged in a 90-day trade truce, leaving some investors hopeful that the world’s second-largest economy can turn it around and post some growth, even if it is in the short-term. Beijing is the world’s biggest consumer of the industrial metal, but demand has been sluggish in recent months, on the heels of the trade war.

Meanwhile, according to the US Commodity Futures Trading Commission (CFTC), hedge funds and money managers have slashed their net-long positions in copper in the week ending December 12.

In other metals markets, February gold futures were flat at $1,251.40 per ounce. March silver futures dipped $0.025, or 0.17%, to $14.73 an ounce. March platinum futures shed $3.20, or 0.4%, to $792.70 per ounce. January palladium futures tacked on $2.50, or 0.21%, to $1,184.50 an ounce.

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