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Interpreting Base Metals’ Reactions to the Strong US Dollar on November 5

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Pressure on base metals

On November 5, almost all base metals closed negative because of the surge in the US dollar index. The LME (London Metal Exchange) 3M copper price fell by 2.4%, closing the day at $5,011 per MT (metric ton). This is the lowest price level for copper since September 29, 2015.

As the graph above shows, after showing weak performance last week, copper started this week on a positive note but tumbled to a five-week low as the stronger dollar weighed on base metals. The COMEX copper price fell by 2.9% on November 5.

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Aluminum unchanged

The LME 3M aluminum price had remained almost unchanged, with a slight increase of $3. Then on November 5, LME 3M aluminum surged by 0.2%, closing at $1,507 per MT. Aluminium took support at price level $1,462.5 per MT on October 29 and has been trading higher ever since. The fall in aluminum prior to this period was stopped by a spike in cancelled warrants in LME inventory.

Nickel and zinc reaction

On November 5, LME 3M nickel prices fell by 0.6%, closing the day at $9,800$ per MT. LME 3M nickel had consolidated between October 10–29, but then it started to fall.

Meanwhile, LME 3M zinc fell by 1% on November 5, closing at $1,664 per MT. Zinc has been in a downtrend since October 12, trading at its lowest price levels since early October on November 5. Zinc lost all the gains from Glencore’s zinc output news in October.

Lead, tin, and impact

LME lead and LME tin fell by 1.5% on November 5. Before the fall, LME tin had consolidated for first three sessions of earlier that week. But the performance of base metals largely impacted the equity prices of major mining companies such as Freeport-McMoRan (FCX), Anglo American (AAUKY), BHP Billiton (BHP).

On November 5, major base metal ETFs including the SPDR S&P Metals & Mining ETF (XME) and the Powershares DB Base Metals Fund (DBB) closed in the red due to the disappointing performance of base metals.

Continue to the next part of this series for a look at how mining companies reacted to falling base metal prices under the weight of the US dollar on November 5.

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