The decline in copper prices can be attributed to hawkish rate hikes and a strong dollar, outweighing the positive impact of decreasing stocks at the London Metal Exchange (LME).
On the Comex market in New York, copper for delivery in July experienced a 2.21% drop, reaching $3.80 per pound ($8,360 per tonne).
According to Ole Hansen, the head of commodity strategy at Saxo Bank, the decline in copper prices aligns with the overall trend observed in growth-dependent commodities. This trend emerged after a week that witnessed unexpectedly hawkish rate hikes, coupled with remarks from U.S. Federal Reserve Chair Jerome Powell indicating that the Federal Open Market Committee (FOMC) has more to come.
As the risk of higher rates potentially triggering an economic downturn grew, some investors sought safe-haven assets, including the US dollar. This, in turn, diminished the attractiveness of dollar-priced commodities for holders of other currencies.
Meanwhile, the LME-registered warehouses continued to experience a decline in copper stocks, with the exchange’s daily data indicating that headline inventory dropped to a one-month low of 79,300 tonnes after 1,100 metric tons of outflows. This reduction in stocks has raised concerns in the market regarding the availability of copper.