Copper retracement or reversal?

Published Mon, Jun 28, 2021 · 05:50 AM

A RALLY in commodity markets may sound exciting, but can be uninviting for governments around the world. Booming commodity prices can lead to high producer prices and cause unintended inflationary effects, thereby restraining countries' efforts to revive their economies from Covid-19.

This is especially true for copper, which saw its price stage an impressive 148 per cent rally from US$1.9725/pound in March 2020 to an all-time high of US$4.8880/pound in May 2021 (as seen by the most liquid month of Comex copper futures, the rolling first contract month).

The surge to record prices definitely caught the attention of its top consumer, China. High prices of copper and other industrial materials have caused the country's factory-gate price inflation to hit a 13-year high in May this year as costs were passed on from manufacturers to wholesalers and retailers. In response, the Chinese government announced plans to sell some of its strategic reserves in a move designed to curb the rally and stabilise prices.

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