Johannesburg - Copper briefly surpassed $6 000 a ton and headed for the biggest weekly rally ever as the metal became the focus for traders speculating on Donald Trump’s pledge to pour money into US infrastructure.
Copper rose as much as 7.6 percent to $6 025.50, the biggest intraday increase since 2009. Prices were at $5 956.50 as of 10:28 a.m. in London. For the week, the metal is up 19 percent, the most in records stretching back to 1986.
As the most-traded base metal and a barometer of economic growth, copper has become a proxy for investors’ views that Trump’s presidency will boost government spending on infrastructure. The intensity of the rally has also been fuelled by speculative trading in China, which will cool later this year, Citigroup Inc. said in a note.
“Infrastructure spending tends to favour steel and aluminum, but when there’s momentum towards metals, copper tends to lead,” Harry Tchilinguirian, head of commodities strategy at BNP Paribas in London, said by phone.
Prices have surged 28 percent in just three weeks. Copper’s 14-day relative strength index was at 92, the highest recorded. A reading above 70 suggests an asset is overbought.
An increase in trading fees and margins on Chinese commodities exchanges is prompting speculators to trade copper on the London Metal Exchange, Citigroup analysts including David Wilson wrote in an e-mailed note.
Other industrial metals also climbed, with nickel up 1.8 percent and zinc 0.9 percent higher.
Despite the recent rally, “fundamentals haven’t changed. I don’t think there’s any change in supply and demand,” Mikinobu Ogata, senior managing executive officer of Sumitomo Metal Mining, said in Tokyo on Friday. Current prices reflect speculative money flowing into the market, Ogata said. The producer cut its full-year forecast for copper to $4 726 a metric ton, from $5 000 in May.
-With assistance from Masumi Suga and Martin Ritchie.
BLOOMBERG