As traders feel increasingly confident that the U.S. Federal Reserve Bank will expand the monetary base by buying bonds, the dollar is sliding and commodity prices are rising ahead of next week's Federal Open Market Committee meeting.
Copper, a key industrial metal that's highly sensitive to currency fluctuations, rose as a result. Comex copper futures for December delivery gained 8.55 cents to trade at 388.25 cents per pound on Monday morning.
"Copper and the rest of the metals are all predictably higher off the back of a dollar further weakened by the G-20 statements," Alex Heath, head of industrial-metals trading at Royal Bank of Canada Europe, told Bloomberg News.
When the dollar loses ground, it makes dollar-denominated commodities relatively cheaper in other currencies, like the yen and the euro. That drives consumption, raising the price overall.
In addition to the currency effects, there's also concern that a strike in Chile – by far the world's largest producer of the metal – could create a supply deficit. Workers at the Collahuasi mine in Chile will decide this week whether to walk away from work in a union dispute.
Risk Disclosure
This material is conveyed as a solicitation for entering into a derivatives transaction.
This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.
Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.
Trade recommendations and profit/loss calculations may not include commissions and fees. Please consult your broker for details based on your trading arrangement and commission setup.
You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.
