Copper drifts higher on worries about US debt
LONDON: Copper prices edged higher on Wednesday as investors spooked by growing US debt levels looked for hard assets and as the dollar weakened.
Benchmark three-month copper on the London Metal Exchange (LME) was up 0.2% at $9,536 a metric ton by 1355 GMT. Republicans in the US House of Representatives are trying to overcome internal divisions about President Donald Trump's tax cut and spending bill, which would extend his 2017 tax cuts.
Credit-rating firm Moody's last week stripped the US government of its top-tier credit rating, citing the nation's growing debt. 'The fiscal debt story is one that's not only underpinning gold, platinum and silver, but also copper and simply tangible assets in general,' said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.
'This tax cut in the US, if extended, would basically dig an even bigger hole in their budget, making it even riskier to hold US bonds.' Copper touched its strongest price in six weeks last week at $9,664, bolstered by a 90-day pause agreed by China and the US on most of their tit-for-tat tariffs, but that optimism was fading, Hansen added.
'It's not really an inspirational market right now. I think we are most certainly in a wait-and-see mode, so that could cap the upside in the short term.' The most-traded copper contract on the Shanghai Futures Exchange rose 0.3% to 78,100 yuan ($10,839) per ton. The US dollar fell on Wednesday, extending a two-day slide against major peers, making greenback-priced commodities less expensive for buyers holding other currencies.
'Technically, copper has found strong support at $9,500 per ton, and in the near term, prices are targeting the $9,950 per ton mark, barring any significant negative macroeconomic surprises,' said Sugandha Sachdeva, founder of SS WealthStreet, a New Delhi-based research firm. Lead slipped 0.5% to $1,970.50 a ton after on-warrant LME inventories soared by 75% to 216,175 tons. Among other metals, LME aluminium dipped 0.1% to $2,468.50 a ton, nickel lost 0.1% to $15,510, zinc gave up 0.7% to $2,692 and tin fell 0.5% to $32,905.
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