On Tuesday, Copper closed on their highest gains in nearly two years due in part to soaring oil prices, and expectations regarding China boosting their economy with stimulus measures. Copper for March delivery settled up on the Comex division of the New York Stock Exchange at 3.7 percent to $2.5815 a pound. Tuesday also marked the steepest rally in terms of percentages since May, 2013.
Oil hit a one-month high as prices were pushed up by U.S. refinery strikes. As oil rose it prompted a rush for other commodities, namely copper, which had reached a five-and-a-half year low recently while investors speculated the demand for the metal in a slowing global economy. But Tuesday’s turnaround sent copper on the rise into a short squeeze. ”The market was quite short on copper, and this turnaround caught traders by surprise,” said Bart Melek, head of commodities strategy at TD Securities.
By Wednesday, copper prices hit a two-week high after China’s central bank added more liquidity to the economy. “This will give hope to the market that there is some stimulus on the way and that China is reacting to the weaker economic data by stimulating growth,” said Gayle Berry, metals strategist at Jefferies. “It will give temporary support to the market. Whether or not that continues will depend on whether people believe it will be enough to filter into the wider economy.”
The price of copper still remains vulnerable with signs of rising supplies still looming. Experts are also concerned about the rising dollar against a basket of currencies. With the dollar being strong, commodities priced by the U.S. unit become more expensive for holders using other currencies. For instance, Pan Pacific Copper, Japan’s number on smelter, stated that it would not be taking term deliveries of BHP Billiton copper concentrates after differences on processing fees accrued between the two.
