The Copper Monthly Metals Index (MMI) traded sideways, with copper prices falling 2.0% overall in October-November.
Copper prices traded in a narrow range throughout October, although volatility remains a risk. Overall, prices are only slightly above their late September lows. Copper is also one of several base metals that have traded sideways as the macro downtrend pauses.
A weaker dollar boosts copper prices
While the U.S. dollar index has hit fresh 20-year highs for months, its macro upside has slowed after peaking in late September. While the index consolidated in October, it rebounded again ahead of the Fed meeting in early November. However, continued but likely small rate hikes have proven insufficient to sustain the rally. For now, the index continues to fall and may even challenge the late-October lows.
The downtrend in the copper price index appears to have bottomed out in mid-July and copper has struggled to break out of the range since. However, on Nov. 3, as the U.S. dollar index began to slide, copper posted gains of more than 5%, unable to make higher highs.For copper, if the U.S. dollar weakens and the bullish momentum persists, this could prove that copper prices are starting to break out to the upside. At the very least, less dollar volatility will be more neutral to copper and commodity prices.
Rumours of an easing of coronavirus outbreaks in Asia spark copper price gains
As the dollar weakened, speculation that the Asian country could end its draconian virus policies further added to the bullish sentiment.Nearly three years on, Asia remains the last major region to stick to economic restrictions on the outbreak. Rumors began to circulate in early November that Asian policymakers planned to withdraw from their current pandemic policies by March 2023. Such reports suggest that officials are concerned about the economic costs of the massive lockdown, which has dampened both demand and production.
Speculation that established coronavirus policies could soon disappear has sparked a rally in several markets. Copper prices have been underpinned in recent months, in part by strong demand in Asian countries, and the prospect of economic reopenings helped prices bounce back above a narrow trading range in October.
To be sure, markets such as copper could rebound when Asian countries reopen their economies.With production no longer constrained and Asian demand fully unleashed, copper prices could see historic volatility.
LME Copper Daily Chart