Copper Edges Down Ahead of ECB Decision

By David Hodari Features Dow Jones Newswires

Copper prices continued to inch down for a second consecutive day on Thursday, as the dollar edged up ahead of the European Central Bank's policy statement, expected later in the day.

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The price of copper was down 0.42% at $6,981 a metric ton in midmorning trade.

Gold prices, meanwhile, were flat at $1,277.41 a troy ounce, with traders treading water ahead of the ECB's announcement.

The WSJ Dollar Index, which measures the U.S. currency against a basket of 16 others, ticked 0.04% higher to 87.20, making dollar-denominated metals slightly more expensive for holders of other currencies. A stronger dollar makes dollar-denominated metals more expensive for holders of other currencies.

Copper prices rose through the $7,000-a-ton barrier last week but have since hovered either side of that level, said William Adams, an analyst on fastmarkets.com. "The rally seems to be pausing," Mr. Adams said.

Foreign exchange and commodities traders were awaiting the ECB's statement Thursday afternoon, as a widely expected decision to taper its bond-buying program could buoy the euro versus the dollar. That in turn could spur commodities buying.

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The focus on the ECB came after the end of the Chinese National Communist Party Congress, which finished Tuesday and saw President Xi Jinping both consolidate power and leave the country's economic growth target unchanged.

A cut to growth rates might have engendered a selloff in metals, analysts said before the conclave. The absence of such a reduction, though, saw traders avoid bold moves ahead of the ECB decision and London Metal Exchange Week, beginning Monday, where industry operatives will meet and discuss the sector's future direction.

Instead, base metals were "expected to see ongoing support following promotion from the [Chinese congress] in driving construction associated with the "One Belt, One Road" infrastructure projects, with enormous consumption across base metals," said John Meyer, an analyst at SP Angel.

Among precious metals, silver was flat at $16.96 a troy ounce, palladium gained 0.62% to $969.50 a troy ounce and platinum fell 0.24% to $921.50 a troy ounce.

Among base metals, zinc rose 0.19% to $3,214 a metric ton, aluminum gained 0.14% to $2,193 a metric ton, hitting a five-year high. Tin gained 0.28% to $19,875 a metric ton, nickel gained 0.51% to $11,910 a metric ton and lead fell 0.12% to $2,485 a metric ton.

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

Gold prices fell Thursday, weighed down by a stronger dollar after European Central Bank officials unveiled plans to scale down but extend their quantitative easing program.

Gold for December delivery closed down 0.7% at $1,269.60 a troy ounce on the Comex division of the New York Mercantile Exchange. A stronger dollar has helped keep prices below $1,300 for much of October, and a rising U.S. currency was hurting gold again Thursday.

The ECB said it would pare back its monthly bond purchases and keep buying until the end of September, with ECB President Mario Draghi noting that the bond-buying program could be extended. Mr. Draghi said the continued stimulus is needed if inflation is to rise to the ECB's target of just under 2%.

Those comments pushed the euro down against the dollar, which then weighed on gold prices because the dollar-denominated metal becomes more expensive for foreign buyers when the dollar rises. The WSJ Dollar Index, which tracks the U.S. currency against a basket of 16 others, was recently up 0.7%.

The dollar rose further following the news that the House of Representatives adopted a budget that sets the stage for a rewrite of the U.S. tax system.

"A strong dollar is often a prelude to a weaker gold market," said Ira Epstein, a strategist at Linn & Associates, noting that it is a "very difficult time for the gold market" because of the dollar's recent strength.

Amid speculation about the next Federal Reserve chair, investors will continue keeping a close eye on central-bank signals. Gold struggles to compete with yield-bearing assets like Treasurys when interest rates rise, and the Fed's commitment to its plan to gradually raise rates also has helped boost the dollar.

Mr. Epstein said he has clients in no metal positions because of the Fed's current outlook, easing geopolitical tensions and the lack of inflation. Some investors use gold as a hedge against higher consumer prices.

Among base metals, copper for December delivery fell 0.2% to $3.1775 a pound. The industrial metal sits near three-year highs, buoyed by global growth and a strong demand outlook from China, the world's largest consumer.

Write to Amrith Ramkumar at amrith.ramkumar@wsj.com and David Hodari at David.Hodari@dowjones.com

(END) Dow Jones Newswires

October 26, 2017 15:00 ET (19:00 GMT)