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Copper Surges Again on Chinese Economy Optimism, Declining Stocks

August 29, 2017 at 16:53 by Andrew Moran

Copper prices are posting further gains on Tuesday, buoyed by declining red metal stockpiles and growing optimism over the Chinese economy. The industrial metal is trading at its highest level in nearly three years, and some bullish investors say copper has room to grow.

September copper futures rose $0.016, or 0.54%, to $3.079 per pound at 16:33 GMT on Tuesday. The red metal is settling at its best point since November 2014. Year-to-date, copper prices have soared more than 22%.

One of the key factors for copper’s dramatic climb is increasing optimism over the Chinese economy. Since mid-August, economic data suggest that there is overwhelming demand for the industrial metal, especially with supplies falling that could offer additional support for copper prices. Investors say early September will be a key time for copper traders because data from the nation’s purchasing managers index will be released. China is the world’s largest consumer of copper.

A tumbling US dollar has also played a role in the metal’s rise as the greenback shed 0.16%. A weaker US dollar is good for commodities like copper because it makes it cheaper to purchase for foreign investors. The US dollar has been slipping this summer, plummeting to pre-election lows amid heightening geopolitical tensions.

Investors are betting that the global supply surplus will dwindle, primarily because of reports that there will be continued labor disruptions in Latin America and Southeast Asia. This has been occurring for much of the year, contributing to the metal’s earlier jump. The higher prices have encouraged more drilling in Latin America, where it is experiencing the most drilling activity in about three years.

Many traders have built long positions on copper as hedge funds and money managers boost their net long totals to more than 122,000 lots, according to the Commodity Futures Trading Commission (CFTC). It should be noted that experts still say that the global copper deficit will worsen sometime this year.

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