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Upbeat Chinese Demand Forecast Lifts Copper Futures

June 27, 2017 at 16:54 by Andrew Moran

Copper futures are trading higher on Tuesday as investors forecast higher demand from China. Despite a firmer US dollar and negative economic data, traders are undergoing some bargain buying of the industrial metal.

July copper futures rose $0.022, or 0.84%, to $2.647 per pound at 16:34 GMT on Tuesday. Since the end of Friday’s trading session, copper prices have been hovering around 11-week highs. Year-to-date, the red metal has climbed more than 5%, primarily due to supply issues earlier this year.

According to Reuters, investors expect higher demand from China over the summer, especially with Beijing looking to stimulate the economy through infrastructure projects, says Societe Generale analyst Robin Bhar. There are also concerns over mine supply because there are reports suggesting that work disruptions at some of the world’s biggest mines could take place again.

We [have] had some reasonably good data on the demand front out of China in terms of state power grid authorisations, better automobile production, a stable housing market. At the same time you [have] had supply concerns returning.

The industrial metal was further supported by a falling US dollar as the greenback shed 0.78%. A weaker US dollar is good for dollar-denominated commodities like gold, silver, and copper because it makes cheaper for foreign investors to purchase.

Any gains were capped because of recent reports that new orders for key US capital goods unexpectedly declined 1.1% last month. Data also highlight that shipments of these American capital goods fell sharply, which has some analysts hinting at a possible loss of momentum in the manufacturing sector.

Money managers and hedge funds have reduced their net long positions in copper futures and options in the week ending June 20, according to data from the US Commodity Futures Trading Commission (CFTC).

Other metals are remaining relatively flat. August gold futures jumped $0.70, or 0.06%, to $1,247.10 per ounce. July silver futures decreased $0.02, or 0.16%, to $16.54 an ounce.

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