Copper falls due to the rise of the dollar and the flight of speculators

Copper prices tumbled to their lowest level in 17 months on Tuesday as the dollar rose, drawing investment flows away from commodities, as fears of a recession continued.

At 1030 GMT, three-month copper on the London Metal Exchange (LME) fell 2% to $7,849 a tonne, its lowest since February 2021, in its fourth straight session of losses.

“Base metals remain under enormous pressure and we see further declines ahead,” said Tom Price, Liberum’s chief commodity strategist, adding he expected copper to drop to $7,000 a tonne within three to six months.

The dollar index soared to its highest level in two decades, making commodities priced in the US currency more expensive for buyers using other currencies.

“There is no return in commodities, so speculators are moving their money out of commodities into US dollars, property, any non-commodity US dollar asset that gives them a return”Price said.

Shanghai’s August copper contract ended the day down 1.9% at 60,110 yuan ($8,975.66) a tonne.

Eastern Chinese cities tightened COVID checks as coronavirus cases emerged.

Services activity in China grew at the fastest pace in nearly a year in June as the easing of COVID restrictions reignited demand, while service sector activity in Japan expanded at the fastest pace in more eight years old.

Chile’s total copper production fell 2.55% in May to 478,800 tons, government agency Cochilco reported on Monday.

Among other base metals, aluminum fell 3% to US$2,389.50 a tonne; zinc fell 2.7% to US$3,032.50; lead was down 0.7% at $1,943, nickel was down 1.2% at $22,230 and tin was down 2.5% at $25,945.