London copper recovered from an early dip on fresh Middle East tensions to trade higher for a third straight session on Wednesday, lifted by low inventories and tight supplies, while a softer dollar and firmer yuan also supported prices.
Iran launched a missile attack on U.S.-led forces in Iraq on Wednesday, hours after the funeral of an Iranian commander whose killing in a U.S. drone strike has raised fears of a wider war in the region. The base metals complex initially tracked equity markets lower as investors switched into safe-haven assets such as gold, but subsequently clawed back ground. “So far the metals have reacted to the news … without too much drama,” Malcolm Freeman, director of Kingdom Futures, wrote in a note.
“But it is very much a case of the markets in general holding their metaphoric breath until we find out what, if any, response the (United States) will make,” he added.
FUNDAMENTALS
* COPPER: Three-month copper on the London Metal Exchange fell as much as 0.6% to $6,115 a tonne before recovering to trade 0.5% firmer at $6,177, as of 0709 GMT. The most-traded March copper contract on the Shanghai Futures Exchange ended flat at 48,860 yuan ($7,038.22) a tonne.
* CHILE: Copper output slumped at Chile’s state miner Codelco and BHP’s sprawling Escondida mine in November, according to Chile state copper agency Cochilco, amid a turbulent month of riots and mass protests.* STOCKS: LME copper stocks of just 140,925 tonnes, the lowest since March, were limiting any price fall.
* IRAN: The metals complex is a “play of its own, less oil-related and less freight-related,” one trader said of the potential impact of the Mideast tensions. Oil prices were about 1% higher but well below highs hit in a frenetic start to the trading day.
* GOLD: Gold soared as much as 2% to vault over the $1,600 ceiling for the first time in nearly seven years.
* USD: The dollar index fell by 0.1% to 96.948. A weaker greenback makes dollar-denominated metals cheaper for holders of other currencies and can support prices.
* RMB: “Base metals found support in the firmer yuan, which reached a five-month high, with China appearing more occupied with the upcoming trade deal due to be signed on Jan. 15,” Marex Spectron wrote in a note. A stronger yuan makes metals cheaper for Chinese buyers.
* COPPER: The copper price is unlikely to rebound in 2020 even if Sino-U.S. trade tensions subside, the head of Chile mining trade union Sonami said.
* OTHER METALS: Nickel fell as much as 1.3% but rebounded to trade flat. Aluminium and lead added 0.4%, while zinc rose 0.5%. Tin was the laggard, losing 0.3%.
