Copper prices climbed on Thursday, driven by investors buying on recent dips, a surging rally in Artificial Intelligence stocks, and a decline in the US dollar. This upward movement occurred despite persistent concerns about the Federal Reserve's hawkish stance on interest rates, reinforced by Fed Chair Kevin Warsh's recent remarks on inflation vigilance which previously rattled markets and strengthened the dollar. Traders had quickly repriced futures markets, with increased bets on a July rate hike.
The weaker dollar made dollar-denominated commodities like copper more affordable for international buyers, contributing to the price increase. However, the wider demand outlook remains uncertain due to uneven economic data from China, where consumer spending contracted year-on-year in May—the first decline since the pandemic recovery. Property investment in China also remains weak, and industrial capacity utilization is trending lower, creating a fragile backdrop for the metal often seen as a barometer of global economic health.
Analysts note that until clearer guidance emerges from the Fed regarding its monetary policy, copper will likely remain under pressure from both financial positioning and physical demand concerns. Speculative long positions in base metals are currently almost non-existent because higher rates make holding raw materials less attractive. Any significant recovery remains fragile without significant speculative-buyer interest. The combination of hawkish Fed policy, a strong dollar (despite today's dip), and uncertain Chinese demand has created high volatility for copper, which is sensitive to shifts in monetary policy and macro sentiment. If the dollar continues to weaken or Chinese stimulus measures gain traction, copper could find more relief.
