Copper prices nearly achieved a six-week high on Tuesday 27 August 2024. Analysts attributed these movements to peaked investor interest in anticipation of the predicted US interest rate cuts.
Expected US Rate Cuts Give Copper Price A Boost
Based on CNBC data, the September 2024 delivery of copper clocked more than $4 per pound to record its highest level since 22 July 2024. Concurrently, the tri-monthly copper price on the London Metal Exchange also increased and traded at more than $9 per metric ton.
Even though this base metal experienced a four-month low in August 2024, it has been rising consistently in recent weeks. CNBC referenced Ole Hansen, Saxo Bank’s head of commodity strategy, who claimed that a renewed demand from hedge funds braced copper’s latest rally. In a research note, he wrote:
We believe the worst of the correction is over, but before copper can mount a stronger recovery, demand fundamentals need to improve, potentially supported by restocking through lower funding costs once the [Federal Open Market Committee] starts its long-awaited rate-cutting cycle.
He added that investors are avidly watching copper stock levels at warehouses to plot investment viability. On Friday 23 August 2024, the US Federal Reserve’s chair, Jerome Powell, said that “time has come for the policy to adjust”, fanning the flames of expected rate cuts on 18 September 2024.
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Economists believe that copper prices will benefit from a US interest rate cut as it will relieve the financial pressures experienced by producers and manufacturers. A high demand for copper is widely regarded in financial circles as a sign of a healthy economy.
