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Why Did Copper Fall in the LME and COMEX Last Week?

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Mar. 28 2016, Updated 1:42 p.m. ET

Copper fell in the LME and COMEX

After closing the previous week in profits, copper started on a positive note last week. However, it wasn’t able to carry the same positive momentum throughout the week. In the week ending on March 26, copper in the LME (London Metal Exchange) fell 1.9%. In COMEX, copper fell 2.3%. At the beginning of the week, Market participants’ optimism grew due to stimulus from China. It supported copper prices. However, the strong dollar and comments from Fed officials pulled copper prices down. They closed the week with losses. Since the beginning of 2016, copper gained 5.10%.

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Optimism behind copper prices

Even though the recent rally in copper isn’t backed by any strong fundamental factors, the hope of stimulus from China spread optimism in the copper market. This sentiment was also supported by strong copper import data. The data showed a 50% increase in China’s February copper imports. In addition, seasonal factors and an increase in net long positions of funds in LME copper also supported copper prices. However, this sentiment weakened and copper starting falling down due to the stronger dollar over the week.

Fed comments and strong dollar

The hawkish comments from St. Louis, Chicago, and Philadelphia Fed officials strengthened the dollar. The Philadelphia Fed president Patrick Harker supports three interest rate hikes in 2016. In an interview last week, St. Louis Fed official James Bullard said that the Fed must consider an interest rate hike in April 2016. Chicago Fed president Charles Evans commented that the US economy has “good fundamentals.” These comments from Fed officials strengthened and impacted copper prices.

Similar to base metals, miners also declined last week. Freeport-McMoRan (FCX), Glencore (GLNCY), Alcoa (AA), and Rio Tinto (RIO) fell 6.0%, 6.5%, 4.6%, and 4.9%, respectively, last week. The SPDR S&P Metals & Mining ETF (XME) fell 3.7% last week.

In the next parts in the series, we’ll discuss the performance of base metals and miners in detail.

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