In this part, we’ll look at some of the factors impacting copper this month. The US dollar has been strong this month. Copper (FCX) (SCCO), like other commodities, shares a negative correlation with the dollar. As the US dollar strengthened this month, we saw it impact commodities—copper wasn’t an exception. A weaker US dollar (UUP) was among the factors that supported commodity prices in 2017.
Secondly, we saw an increase in copper inventories (ANTO) (GLEN-L). Copper inventories have been volatile this year. The timing of big changes in inventories has intrigued some market observers. Inventory levels are a key price driver because they offer insights into the underlying demand-supply balance. We’ve seen sharp price movements in copper in the last two years as the copper inventory suddenly rose or fell.
Copper tends to be sensitive to geopolitical developments. This month, we’ve seen some interesting geopolitical developments. On the Korean Peninsula, the war of words intensified after joint drills between South Korea and the US. President Trump’s decision to recognize Jerusalem as Israel’s capital has been another geopolitical development.
Without getting into the political implications of the above-mentioned developments, there were some repercussions in financial markets. Geopolitical issues could be another reason why copper prices are seeing selling pressure this month.
Next, we’ll discuss why aluminum prices have been weak for the last few weeks.