Copper Climbs to 4-Month High as Metals Rally Thanks to Fed

What's Behind the Rally in Copper?
  • `This is the end of a bear market,' Bloomsbury's Hollands says
  • Copper inventories on LME decline for a 20th straight day

Industrial metals rallied on speculation that accommodative U.S. monetary policy will support demand for raw materials. Copper jumped as stockpiles tracked by the London Metal Exchange fell the most in almost two years.

Copper for delivery in three months climbed as much as 2.7 percent to $5,068.50 a metric ton in London, the highest since Nov. 5. Aluminum, zinc and nickel added more than 1.5 percent. Mining stocks joined the rally, with Glencore Plc gaining 8 percent.

"This is the end of a bear market," Peter Hollands, managing director of London-based Bloomsbury Minerals Economics Ltd., said by phone. “In other words, bottom formation. I don’t think this is a start of a bull market."

Metals and mining companies are in the midst of a rebound from last year’s selloff, the worst since the global financial crisis of 2008. After slower demand from China and tumbling raw-material prices wiped out profits from some of the biggest metal producers, companies are looking to curb production. The Federal Reserve scaled back expectations for the path of interest-rate increases after a meeting yesterday.

"The Fed’s announcement yesterday has resulted in a global recalibration of the perceived path of U.S. rate rises," Keith Wildie, a partner at London-based brokerage Vantage Capital Markets, said by e-mail. "We see the dollar weakness, which has driven base metal prices higher this morning."

The Bloomberg Dollar Spot Index is heading for a third week of losses, raising demand commodities, which are usually denominated in dollars.

Another bullish sign: copper inventories on the LME are the lowest since 2014. The decline is due to metal moving from LME-monitored warehouses to storage facilities in China as traders take advantage of arbitrage opportunities. Stockpiles dropped 3.7 percent on Thursday.

Inventories of aluminum, nickel, lead, zinc and tin have also fallen this year. Bookings to take out aluminum from LME warehouses surged 26 percent, the most since 2011.

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