Copper prices are on surge amid improvement in Chinese economic conditions as suggested by the better economic figures for March 2019. The COMEX Copper Futures (HG) rose from the level of $2.924 (Day’s low on 16th April 2019) to the present level of around $2.960.
The factor which is supporting the copper prices is the improvement in the relationship between the United States and China. The two significant economies of the globe were in dispute and raged a tariff war against each other which dented their respective economies in the past. However, the on-going trade talks to end the long disputing bilateral disagreement is progressing well and is at the near end, as per the comments from delegations involved in the trade talks.
The outcomes of trade-talks are now getting visible in the economic data, the industrial production and the quarterly GDP of China improved significantly, which in turn, supported the copper prices in the international market.
As per the data, Chinese industrial production improved and increased by 8.5% for March 2019, as compared to the market expectation of 5.6% and against 5.3% reported in January 2019. The significant improvement in the industrial output supported the copper prices, and the prices reached almost to its monthly high (April) of $2.968.
The improvement in industrial production marked an expansion of industrial activity, where copper is considered as a primary material. The rise in the industrial activities, propelled market participants and speculators to take advantage of prices, which in turn, raised the demand of copper and supported its prices.
Apart from the improvement in China’s industrial output, another factor which supported the copper prices was the improvement in quarterly GDP of China. As per the data, China’s quarterly GDP stood at 6.4% for the first quarter of the year 2019, as compared to the market expectation of 6.3%.
The rise in overall GDP was previously evident by an increase in manufacturing expansion, when China manufacturing PMI along with Caixin Manufacturing PMI surged above the level of 50 for March 2019. An overall improvement of the domestic economic condition of China signified an expansion in various sectors, which in turn, supported the base metal prices including copper.
Copper is a dollar-denominated asset, so a fall in dollar supported the copper prices as well; the weak dollar prices provided an impetus to the base-metal investors to buy copper at cheap prices, which in turn raised demand among market participants and supported the copper prices.
On the supply side, the discount between cash LME copper to the 3-M LME copper futures widened and stood at $26 a tonne (as on 16th April), which in turn, represents a healthy supply chain. Previously the supply chain was disrupted, and LME inventory went down significantly.
To gauge the future movement of copper prices, investors and speculators will keep a hawkeye on the developing relationship between the United States and China along with its impact on both economies.
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