Copper price rises after positive coronavirus treatment trials
After some promising trials of a treatment for COVID-19 and robust economic data from the United States, copper prices rose on Wednesday with an enormous appetite for risk in the financial markets.
Three-month copper on the London Metal Exchange (LME) gained by 0.5% at $5,755 a ton. The most widely traded copper contract in July on the Shanghai Futures Exchange closed flat at 46,770 yuan (US $6,598.38) per ton.
Last week, copper reached a record price of four and a half months. The metal recovered nearly 30% from the lows in March.
The World Health Organization (WHO) has updated its guidelines regarding a low-priced, widely used steroid, which studies have shown can help critically ill patients. Meanwhile, data showed that retail sales in the US had increased in May.
Daniel Briesemann, an analyst at Commerzbank, stated that there are visible signs for hope. This gives the potential for higher prices. However, there are many risks that are wholly ignored. He thinks that, given the good spirits of the market, which is evident in rising stock markets, copper prices will have a significantly difficult time coming down.
It is uncertain how the metal prices will develop
The price hike was limited by news that China’s capital, Beijing, extended movement restrictions to contain a coronavirus outbreak that has fueled fears of a full spread. The country set up security checkpoints and ordered everyone to test for the virus.
Even though Chinese factories increased their production since April, the rise is weaker than expected. This suggests that the recovery remains fragile.
Global lockdowns continue to hurt copper demand. Thus, last month, exports from China shrank.
The commodity imports in China decreased by 5.5% in May compared to April.
On the other hand, copper supply has been limited in several regions. Some of the South American mines closed their operation amid the coronavirus outbreak. After the two months of disruption, they started operating again. Still, the amount of production remains uncertain.
The world health crisis has reversed the search for safe-haven assets. Also, the weakening of the dollar has pushed assets denominated in this currency, such as copper.
Several risks will pose as uncertain in the market, at least until the next year.
New waves of infections without a vaccine is a massive danger for the world. We have seen the second wave of the COVID-19 outbreak in the US and China.
Chronic unemployment, bankruptcies, and stock market correction could trigger a depressive spiral in the international economy.
What’s more, geopolitical tensions hit the global economy significantly.
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