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Copper Pared Gains despite a Weaker Dollar on August 18

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Aug. 19 2016, Updated 3:23 p.m. ET

Copper gained on August 18

After losing momentum on August 17, copper recovered on Thursday, August 18, and inched higher due to the softer dollar, only to give back the profits as the day progressed. At 2:05 PM EDT on Thursday, August 18, the COMEX copper futures contract for September delivery was trading at $2.17 per pound, a gain of ~0.84%.

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Softer dollar and weaker demand signals from China

The Federal Reserve minutes from the July meeting were released on Wednesday, August 17, weakening the US dollar. On August 18, the dollar dived to fresh seven-week low price levels. The weaker dollar supports the prices of dollar-denominated commodities such as copper. However, the gains are limited because of weaker demand signals from China.

Copper started the day on a positive note because of the weaker dollar, but it lost momentum as the day progressed and pared the gains as other factors weighed on it. Please read Copper, Gold, and Silver Are Stable Early on August 18 to see how copper performed in the early hours on August 18.

Considering the fact that China is the largest consumer of copper in the world, the country’s economic situation and its construction activity can influence the demand and price trends of copper. According to the data released by the National Bureau of Statistics (or NBS), the number of cities in China that reported a decline in home prices increased for the fourth consecutive month.

In July, 16 out of 70 cities reported a decline in prices, raising concerns of a slowdown in China’s property market. In addition to this, the supply glut situation in the copper market is also weighing on prices. According to recent data, refined copper production increased by 9.6% YoY in July and reached 722,000 tons.

At 2:20 PM EDT on Thursday, August 18, major copper producers Freeport-McMoRan (FCX), Glencore (GLNCY), BHP Billiton (BHP), and Rio Tinto (RIO) gained ~1.4%, ~1.6%, ~1.5%, and ~0.96%, respectively. The SPDR S&P Metals & Mining ETF (XME) and the PowerShares DB Base Metals ETF (DBB) gained 1.1% and ~0.22%, respectively.

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