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Copper Slumps to Two-Year Low on Weak Global Economy

September 3, 2019 at 18:24 by Andrew Moran

Copper futures are slumping to their lowest levels in more than two years, sending signals to investors that the global economy is weakening. The industrial metal did cap its losses on reports that copper consumption will skyrocket, particularly in the green energy sector. But a higher buck did not help the red metal to kick off the holiday-shortened trading week.

December copper futures tumbled $0.025, or 0.95%, to $2.5275 per pound at 18:00 GMT on Tuesday on the Comex division of the New York Mercantile Exchange. Copper prices are now trading at their lowest levels since May 2017, bringing its year-to-date losses to 4.3%.

Investors are shying away from copper over concerns of a serious global economic slowdown. With the de-escalation between the US and China appearing to be uncertain, copper is taking a hit. The red metal is primarily used for construction, manufacturing, and natural-resource development. As some of the world’s largest economies face a recession, traders are pouring into safe-haven assets.

Experts warn that deteriorating US-China relations could soften both economies further, though Beijing is likely to experience the most pain.

The industrial metal was impacted even further on new data showing that global electric vehicle sales fell for the first time. Copper is a necessary component for electric cars, but with sliding sales, it is affecting spot demand on the London Metal Exchange (LME).

The US dollar is trading higher on Tuesday rising 0.05% to 98.97, from an opening of 99.08. A stronger buck is bad for dollar-denominated commodities because it makes it more expensive for foreign investors to purchase. Investors are lifting the dollar as a safe-haven play.

But should the world slip into a recession, then central banks could fire the big guns and slash interest rates, allowing governments to employ stimulus packages, which would be a boon for copper.

It was not all bad news for copper as investors returned from the Labor Day long weekend.

new forecast from Wood Mackenzie suggests that copper consumption is going to accelerate within the next decade by the green energy sector. Specifically, the demand will grow from manufacturers of wind turbines. This would coincide with the projected supply shortage.

In other metal markets, December gold futures surged $26.80, or 1.75%, to $1,556.20 per ounce. October silver futures tacked on $0.91, or 4.95%, to $19.25 an ounce. October platinum futures spiked $26.00, or 2.79%, to $957.70 an ounce. October palladium futures dipped $3.60, or 0.23%, to $1,535.60 per ounce.

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