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Copper Slips Amid New COVID-19 Outbreak in China, Stronger US Dollar

Copper futures are slipping to start the trading week, driven by investor concerns over the new coronavirus outbreak in China and a rising US dollar. Financial analysts are also forecasting that prices for the industrial metal could begin to retreat from January highs this year as producers take advantage of copper hitting a seven-year high.

March copper futures tumbled $0.012, or 0.33%, to $3.614 per pound at 13:49 GMT on Monday on the New York Mercantile Exchange. The red metal is coming off a tepid weekly gain of 0.3%, raising its gain in the first month of the calendar year to just below 3%. Over the last 12 months, copper prices have soared 40%.

China, the world’s largest consumer of copper, has seen a resurgence of coronavirus cases, forcing the government to lock down up to 30 million people. Chinese officials have sprung into action, constructing a new hospital in less than a week to combat the resurgence of COVID-19 infections. China’s new coronavirus cases have climbed to their highest levels in five months.

But the recent influx in infections is still a fraction of what is transpiring in other parts of the world. According to the latest official numbers, China recorded 109 new cases, raising the seven-day average to 114. In total, the nation has recorded a little more than 89,000 cases over the last 13 months, with a death toll of about 4,600. To compare, the rest of the world is closing in on 100 million total cases and a death toll of 2.13 million.

The latest outbreak comes ahead of the seasonally slow Lunar New Year holiday season.

Beijing has been stockpiling copper throughout the economic recovery, with imports surging climbing by double digits each month since the end of the first wave of the COVID-19 public health crisis. However, there have been some concerns that Chinese importers might reduce their copper acquisitions over the next several months due to ample supplies and cash premiums falling. This could explain institutional investors cutting their net-long positions.

Moreover, Moody’s Investor Service projected that copper prices would ease from January highs as major markets, like Chile and Peru, ramp up production to benefit from these prices. The two South American countries account for approximately 40% of the world’s output. That said, Moody’s still anticipates that copper prices will rise in the short-term due to tighter supplies amid lockdowns and mobility restrictions.

Overall, long-term fundamentals remain strong, the debt rating agency said in its research note. Infrastructure investments, green energy consumption, and a weaker US dollar will support the red metal.

The greenback added to copper’s drop on Monday, with the US Dollar Index (DXY) surging 0.27% to 90.48, from an opening of 90.24. A stronger buck is bad for commodities priced in dollars because it makes it more expensive for foreign investors to purchase.

In other metal markets, March gold futures dipped $0.3999, or 0.02%, to $1,855.80 per ounce. March silver futures slipped $0.011, or 0.04%, to $25.545 an ounce. March platinum futures fell $6.60, or 0.59%, to $1,105.00 an ounce. March palladium futures plummeted $20.20, or 0.85%, to $2,345.00 per ounce.

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source https://www.earnforex.com/commodities/copper-slips-amid-new-covid-19-outbreak-in-china-stronger-us-dollar/

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