Copper Rallies to Three-Year High

By David Hodari Features Dow Jones Newswires

Copper prices continued to tick higher Tuesday, as investor optimism on the Chinese economy lifted the base metal to fresh three-year highs.

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The price of copper was up 0.28% at $6,942.50 a metric ton in midmorning trade in London.

Gold, meanwhile, slipped 0.25% to $1,331.20 a troy ounce, with a lack of fresh developments in North Korea's war of words with the U.S. allowing investors to take a little profit and inch prices away from the 11-month highs hit Monday.

Continued speculative optimism around the Chinese economy continued to take copper higher, said Ole Hansen, head of commodity strategy at Saxo Bank.

"From a long-term perspective, it's the same drivers, with China's clean-air policies and a stronger yuan versus the dollar seeing the market taking aim at the $7,250 [London Metal Exchange] resistance level, " Mr. Hansen said.

Better-than-expected Chinese economic data and the government's environmental policies aimed at limiting air pollution caused by industrial metals smelting have boosted base metals prices in recent months. Investor bets that copper's price would continue to rise hit their highest level since March 2004 on Monday, according to Alastair Munro, a broker Marex Spectron.

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A weaker dollar has also supported metals prices. The WSJ Dollar Index, which measures the currency against a basket of 16 others, has dropped 3% in the past three months. A stronger yuan makes it cheaper for Chinese investors, who accounted for approximately half of global copper demand in 2016, to buy dollar-denominated base metals.

Copper's rally may be running out of steam, though. Those rising long positions leave the red metal vulnerable to profit-taking, Société Générale said in a note.

"There are warning signs: momentum is just too strong and prices don't look justified right now. Calling a top is difficult, but the rally will fade when we close in on that [$7,250] resistance level and investors start to take profit," Saxo Bank's Mr. Hansen said.

Looking ahead, investors were closely watching the European Central Bank's monetary policy statement and press conference, scheduled for Thursday, for any currency-moving statements. Chinese import, export, and trade balance data, due out on Friday, will also be of some interest.

Among precious metals, silver fell 0.39% to $17.84 a troy ounce, palladium rose 0.05% to $980.50 a troy ounce, and platinum fell 0.62% to $1,002.50 a troy ounce.

Among base metals, zinc fell 0.36% to $3,198.50 a metric ton, aluminum fell 0.12% to $2,115 a metric ton, tin fell 0.15% to $20,760 a metric ton, nickel fell 0.57% to $12,210 a metric ton, and lead fell 0.19% to $2,388.50 a metric ton.

Write to David Hodari at David.Hodari@wsj.com

Gold prices continued rising Tuesday, as the latest U.S. response to a North Korea nuclear test and comments from a Federal Reserve official urging caution pushed investors toward the haven asset.

Gold for December delivery was recently up 0.9% at $1,342.00 a troy ounce on the Comex division of the New York Mercantile Exchange. Prices have risen to their highest level in almost a year recently as tensions between the U.S. and North Korea have escalated and many investors have become skeptical that the Fed will raise rates one more time this year amid sluggish inflation.

On Tuesday, President Donald Trump tweeted that he is allowing Japan and South Korea to buy "a substantially increased amount" of military equipment from the U.S. That came after South Korea warned Monday that North Korea appears to be preparing to test another intercontinental ballistic missile and U.S. Ambassador to the U.N. Nikki Haley called for "the strongest possible measures" against North Korea.

North Korea said it conducted a sixth and significantly larger nuclear test on Sunday. The tensions have supported gold in recent sessions since many investors favor the precious metal during times of geopolitical uncertainty.

Also on Tuesday, Fed governor Lael Brainard said in a speech that the U.S. central bank should be cautious about raising short-term interest rates further until policy makers are confident of overcoming the "persistent failure" to reach 2% inflation. The comments supported gold prices by adding to existing doubts about the Fed raising rates for a third time in 2017. Gold often struggles to compete with yield-bearing assets like Treasurys when borrowing costs rise.

"It's a perfect environment right now for gold to see some higher levels, " said Bob Haberkorn, senior market strategist at RJO Futures.

A weaker dollar also supported gold prices Monday, as the dollar-denominated metal becomes cheaper to foreign buyers when the U.S. currency falls. The WSJ Dollar Index, which tracks the dollar against 16 other currencies, was recently down 0.5%.

Among base metals, copper for December delivery was recently up 1.2% at $3.1555 a pound. Synchronized global economic growth has pushed prices for the industrial metal to three-year highs, and strong manufacturing data out of China -- the world's largest copper consumer -- last week has given copper its latest boost.

(END) Dow Jones Newswires

September 05, 2017 11:18 ET (15:18 GMT)