The fluctuation in the value of the currency used to price commodities typically affects a portion of their price. Since March 2022, the US Dollar (market symbol: DXY) has lost 10% of its value. One would anticipate that commodity prices would rise by a similar amount, or around 10%. Producers don’t care whether the value of your currency has decreased since they want the selling price in their currency to be consistent, which necessitates a rise in the price in your currency.
Speculators (Chinese hedge funds) who believed copper’s use in collateral negotiations would be less desirable are said to have pushed copper prices lower. People are worried about copper’s decline since it comes after a string of unreliable data from China. While there are admittedly some supply-side issues for certain metals, other base metals have fared far better in comparison.
Prices of these very lightly traded commodities are influenced by speculation. There just aren’t any conclusive numbers that support the assertion of “supply demand.” The supply is potentially almost always available, while the demand is comparatively linear through time. This is more of a psychological and crowd-madness model than an economic one.
Although a weaker U.S. dollar provided some support, copper prices lost pace on Wednesday as a seven-month low reading in China’s economy statistics dampened confidence. The most actively traded January copper contract on the Shanghai Futures Exchange fell 0.3% to 64,650 yuan ($9,056.52) per tonne, while three-month copper on the London Metal Exchange increased 0.3% to $8,057.5 per tonne. A futures dealer in Shanghai claimed that “the poorer than expected numbers strangely dampened previous positive enthusiasm.”
The previous session saw a rise in copper prices. Propelled by expectations that Beijing might relax its COVID-19 policy. This after providing assistance to the struggling real estate industry. The path between now and then “may be hard,” according to J.P. Morgan, even though its baseline scenario implies a likely shift in China’s policy to re-opening from next spring. Investors around the world are eagerly expecting Federal Reserve Chair Jerome Powell’s speech for clues about the direction the U.S. central bank will take its monetary policy.
As it becomes more affordable for non-dollar holders to purchase the commodities with dollar prices, the dollar index has declined from a 20-year high reached on September 28. This has supported metals prices.
Other metals were aluminum, which remained steady at $2,378.5 per tonne, zinc, which increased by 0.2% to $2,940 per tonne, lead, which increased by 0.3% to $2,140 per tonne, and tin, which decreased by 1.7% to $22,400 per tonne.
Nickel increased 3% to 199,530 yuan per tonne. Zinc was down 1% at 23,690 yuan per tonne. And tin declined 0.6% to 183,640 yuan per tonne on the SHFE.