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Longest Losing Streak: Why Copper Disappointed Last Week

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Longest losing streak in 2016

Copper fell for the second consecutive trading week. Currently, it’s trading at one-month low price levels. Copper in the LME (London Metal Exchange) fell 2.2% in the week ending on April 2. Last week, it fell 3% in COMEX. Copper in the LME fell for six consecutive trading days—the longest losing streak in 2016. Since the beginning of 2016, copper in the LME gained 2.8%.

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Stronger dollar pulled copper down

After closing the previous week with a loss, copper in COMEX started this week by gaining 0.76% on March 27. The LME remained closed due to Easter Monday. Weakness was observed in copper prices in both the exchanges on March 28 due to the stronger dollar. On March 28, copper fell in both of the exchanges due to the strength of the US dollar. The reason behind the dollar’s strength was the hawkish comments issued by several Fed officials. The stronger dollar makes dollar-denominated commodities like copper expensive. It pulls them lower.

Weak economic and demand situations

On March 29, copper remained weak because of the weak demand outlook from China. It was also supported by the slump in the premiums paid by Chinese copper buyers on copper imports. In addition, the disappointing report released by Barclays on copper and oil added strength to the worries. According to the Barclays report, oil and copper are at risk. The recent rally wasn’t supported by any strong fundamentals. Barclays said that copper could drop as low as $4,000 per metric ton with an average third quarter price of $4,520 per metric ton.

Last week, Fed Chair Janet Yellen’s speech couldn’t help copper. She warned investors to be careful in handling the Market after the interest rate hike. Even though it softened the dollar, copper couldn’t gain from it because of economic slowdown worries.

Base metal miners Freeport-McMoRan (FCX) and Glencore (GLNCY) fell by 2.2% and 0.58% in last week. Alcoa (AA) and BHP Billiton (BHP) gained 0.63% and 0.04%. The Power-Shares DB Base Metals Fund (DBB) gained 1.8% last week. Next, we’ll discuss how aluminum performed.

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