Metals Rebound From Worst Run in a Year on U.S. Rate Outlook

  • Dollar weakens as Fed takes gradual approach to rate increases
  • LME metals index fell a sixth day before Fed announcement

Industrial metals rebounded from their worst run in a year after the Federal Reserve reiterated a gradual approach to raising interest rates, sending the dollar lower and supporting demand for commodities.

Nickel led gains among contracts on the London Metal Exchange, rising as much as 3.6 percent after Fed policy makers on Wednesday gave little hint of an imminent move. Before the central bank’s announcement, the LME’s index of metals closed lower for a sixth day, the longest run since July 2015.

The Bloomberg Dollar Spot Index fell for a third day, benefiting metals by making them cheaper for investors using other currencies. While admitting risks to the U.S. economy had subsided, policy makers are assessing the fallout from the U.K.’s decision to exit the European Union. Other central banks have pledged more stimulus on concern Brexit will hurt economies.

"There is nothing like a little dollar weakness post-Fed to get the metals higher,” Michael Turek, the head of base metals at BGC Partners Inc. in New York, said in an e-mail. “With other assets possibly overpriced, it will be interesting to see if commodities attract some rebalanced capital.”

Nickel for delivery in three months rose 3.3 percent to settle at $10,695 a metric ton at 7:01 p.m. in London. Copper added 1 percent to $4,896.50 a ton ($2.22 a pound), rising from its lowest close in more than two weeks.

On the Comex in New York, copper futures for September delivery added 1.1 percent to $2.209 a pound.

"Investor sentiment toward industrial metals has turned more positive, as part of a general improvement in sentiment toward riskier assets," Caroline Bain, a commodities economist at Capital Economics Ltd. in London, said in an e-mailed report.

In other metals news:

  • Zinc, lead, tin and aluminum also rose in London.
  • Chinese-owned MMG Ltd. is seeking new zinc mines in Peru after a dearth of global exploration in past decades led to an output crunch.
  • Copper stockpiles in warehouses tracked by the LME fell 2.7 percent to 208,725 tons, the lowest since July 5. One unidentified party held up to 39 percent of available inventories as of Tuesday, according to the LME data.
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