With prices hovering around a 17-month low, Dr. Copper’s forecast for the world economy pessimistic

dr Copper evaluated the global economy and found: “Needs to get better.”

Ironically, the red metal is considered by commodities watchers to have a doctorate in economics, as its use in a range of sectors, including appliances, power generation and autos, helps it predict the trajectory of global growth.

As such, the initial drop in copper prices to a fresh 17-month low on Monday was a worrying signal for some. The Nymex Copper Contract HG00,
-0.26%,
Electronically traded despite the US Independence Day holiday, the copper contract has been toying with below $3.50 a pound, its cheapest since February 2021. The London Metal Exchange’s copper contract, which had suffered a similar drop, recently changed hands below $8,000 a pound Ton.

Hopes that economic activity would pick up pace as China eased COVID-19 restrictions, as well as fears of a supply disruption following Russia’s invasion of Ukraine, helped push the price of the Nymex copper contract to a record high in March drifting just over $5 a pound. LME copper rose to $10,600 a ton, and energy and agricultural raw material costs also rose sharply.

But central banks’ determination to contain such inflation by tightening monetary policy has raised concerns about a global economic slowdown. Recent manufacturing surveys from many developed economies point to declining activity.

Additionally, the recent confirmation that Beijing will continue to tighten COVID-19 curbs to combat outbreaks leaves lingering concerns over constrained demand.

“China is still struggling to find a growth path amid its controversial zero-tolerance approach to Covid outbreaks and the world, led by the US reacting to the negative impact of runaway inflation on consumer spending. The outlook has indeed deteriorated,” he told Ole Hansen, head of commodity strategy at Saxo Bank, in a note to clients.

“Sale [has been] driven by the need to reduce exposure ahead of the summer holidays in several major trading hubs and macro-oriented funds that bought into the rally but are now concerned as the risk of an economic slowdown mounts,” he added.

Still, ANZ analysts believe any surge in Chinese demand will quickly stabilize copper prices, especially as inventories of many base metals are near multi-year lows. Additionally, traders on the LME hold their largest net short position on copper futures since 2015 — around 60,000 contracts, according to Marex Analytics. Such lopsided positioning can result in a quick reversal to the upside if copper bears are forced to exit these trades.

And yet in Dr. Of course, Copper’s forecast also contained positive news. As metal prices fall, so do inflationary pressures, bringing the end of the Federal Reserve’s rate hikes closer.

https://www.marketwatch.com/story/with-prices-skirting-a-17-month-low-dr-coppers-prognosis-about-the-global-economy-is-downbeat-11656933741?rss=1&siteid=rss With prices hovering around a 17-month low, Dr. Copper’s forecast for the world economy pessimistic

Brian Lowry

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