Dollar strengthens and copper prices fall due to economic concerns
Base Metals Plunge Amid Dollar Strength and Tension Fears
Base metals felt the heat on Thursday, with copper prices dipping to a near one-week low, and other metals slipping. This was due to a stronger dollar and escalating global growth concerns triggered by the intense Israel-Iran interactions.
At the London Metal Exchange (LME), the three-month copper stood at a 0.5% dip, trading at $9,609 per metric ton. The metal reached its lowest level since June 13 in the open-outcry trading session.
According to SP Angel analyst, John Meyer, a rising U.S. dollar on account of geopolitical concerns tends to weaken prices due to the U.S. dollar basis. Long-only funds are taking a back seat due to heightened risk concerns, Meyer explained.
The decline is also attributed to reduced activity, as American traders are off on Thursday celebrating the Juneteenth holiday.
The dollar gained ground, bolstered by rising Middle East tensions and Federal Reserve Chair Jerome Powell's cautionary stance on inflation. Meanwhile, oil prices surged.
Israel launched a strike on a significant Iranian nuclear site, while Iranian missiles hit an Israeli hospital. As the world pondered whether the U.S. would join Israel in air strikes targeting Iran's nuclear facilities, President Donald Trump kept everyone guessing.
Copper's descent reflects the complex interplay of factors, including supply chain disruptions, currency impacts, and demand concerns. LME copper stocks decreased by 4,025 tons to 103,325 tons on Wednesday, marking a significant drop not seen in over a year.
Copper has been primarily flowed towards the U.S., drawn by the premium they offer due to anticipation of Trump imposing tariffs on the metal.
Alongside copper, aluminum, tin, zinc, and nickel have also been impacted. While detailed recent price data for tin, zinc, and nickel was not easily accessible, they tend to mirror the trends seen in copper and aluminum.
U.S. tariffs, recession fears, geopolitical risks, and a stronger U.S. dollar are key factors dampening demand, creating supply chain disruptions, and increasing price volatility.
In contrast to copper, aluminum is relatively less impacted by these factors, owing to its relatively more flexible supply. Preliminary Q2 2025 aluminum pricing forecasts hover around $2,200 per metric ton, owing to downward revisions resulting from economic slowdown concerns and tariff impact.
The global zinc market surplus narrowed in April, according to the International Lead and Zinc Study Group, while the lead market saw a shift towards surplus.
In the wake of these developments, geopolitical tensions and a robust U.S. dollar continue to pose challenges for base metal price trajectories, characterized by uneven regional impacts, cautious demand forecasts, and heightened market volatility.
- Thestronger U.S. dollar, due to geopolitical concerns and the cautionary stance on inflation by Federal Reserve Chair Jerome Powell, is swaying trader decisions, causing long-only funds to tread carefully due to heightened risk concerns.
- In trading sessions such as the one on Thursday, when American traders are off celebrating the Juneteenth holiday, there is reduced trading activity that could potentially impact the prices of base metals like copper, aluminum, tin, zinc, and nickel.
- While the descent of copper reflects the complex interplay of factors like supply chain disruptions, currency impacts, and demand concerns, the decline in LME copper stocks by 4,025 tons contradicts the trend seen in other base metals like aluminum, which is relatively less impacted by these factors.
- The tensions between Israel and Iran are not only impacting the prices of base metals but also the sports world, as the world waits to see whether the U.S. will join Israel in air strikes targeting Iran's nuclear facilities, causing uncertainty and adding to the overall market risk.
