Copper futures extended gains from the previous week on Monday to hit the highest level in almost four months amid speculation demand for the industrial metal will increase as a result of accommodative central bank policies in the U.S., Europe and China.
On the Comex division of the New York Mercantile Exchange, copper for May delivery touched an intraday peak of $2.799 a pound, the most since January 5, before trading at $2.769 during European morning hours, up 0.8 cents, or 0.28%.
Futures were likely to find support at $2.645, the low from March 20, and resistance at $2.826, the high from January 5. Comex copper rose 9.8 cents, or 3.68%, last week.
On Friday, copper soared 8.0 cents, or 3.8%, to end at $2.761 as the U.S. dollar tumbled after the Federal Reserve projected a slower pace of rate hikes.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.45% to 98.49 early on Monday. The index ended last week down 2.53%, the biggest weekly loss since October 2011.
A weaker dollar boosts demand for raw materials as an alternative investment and makes dollar-priced commodities cheaper for holders of other currencies.
The dollar’s losses came after the Federal Reserve downgraded its forecasts for growth and inflation and lowered its interest rate projections, prompting investors to push back expectations on the timing and pace of future rate increases.
Investors were looking ahead to Tuesday’s U.S. inflation report after Fed Chair Janet Yellen warned last week that the stronger dollar was pushing down inflation.
Meanwhile, the euro slipped lower against the dollar ahead of a meeting between Greek Prime Minister Alexis Tsipras and German Chancellor Angela Merkel in Berlin later on Monday. The meeting comes amid ongoing concerns over Greece’s future in the euro zone.
Copper extends rally to hit 11-week high
Also on Monday, European Central Bank President Mario Draghi was to appear before a European Parliament committee, with the situation in Greece likely to be high on the agenda.
Elsewhere, in China, the next slice of economic data to come out will be the HSBC (LONDON:HSBA) preliminary purchasing managers’ index for March, due on Tuesday.
Copper traders consider shifts in the HSBC PMI an indicator of China’s copper demand, as the industrial metal is widely used by the sector.
A recent batch of weaker than expected Chinese economic reports fuelled speculation policymakers in Beijing will have to introduce further stimulus measures to boost growth and ward off deflation.
China is the world’s largest copper consumer, accounting for almost 40% of world consumption last year.
Elsewhere on the Comex, gold futures for April delivery dipped $2.90, or 0.24%, to trade at $1,181.70 a troy ounce, while silver futures for May delivery shed 20.5 cents, or 1.21% to trade at $16.67 an ounce.
A delay in raising interest rates would be seen as bullish for gold, as it decreases the relative cost of holding on to the metal, which doesn’t offer investors any similar guaranteed payout.
Gold fell to a four-month low of $1,141.60 on March 17 amid concerns that the Federal Reserve will start raising rates as early as in June.