Copper price on the London Metal Exchange (LME) increased by 11%. to a record high of $14,527.50. per tonne as a result of increases driven by speculators, writes Reuters.
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This was the biggest one-day increase in the price of copper on the LME since November 2008. Some argue that prices are unsustainable due to high inventories and weak physical demand. However, many funds remain bullish, looking for physical assets to offset the weakening US dollar and geopolitical tensions.
Movements on the copper market translated into KGHM quotationsthe Polish copper giant. The stock of the state-owned company increased by over 5 percent on Thursday. and it was one of the largest increases on the WSE.
Raw materials are becoming more expensive. Weak dollar in the background
“There is a visible move towards raw materials on the market, the question is what are the reasons for this. On the one hand, it is said to be the effect of a weaker dollar, but it may also be a speculative factor,” Konrad Ryczko, broker and analyst at DM BOŚ, told PAP Biznes.
Unlike gold, which has also reached record levels, copper is dependent on industrial demand, which has already started to wane amid high prices.
Rally on copper prices. “They are speculators”
“I would be very concerned about where we go in the short term. There will be disruptions in demand, so that suggests it's not very sustainable,” Dan Smith, managing director of Commodity Market Analytics, told Reuters.
In China, where speculators are the main consumers of metals, demand for physical metals is weak.
“I don't think the $14,000 level is stable at this point, and although you never know how high it might go, I think a correction is coming,” a trading source told the Agency on condition of anonymity.
Will copper prices continue to rise?
China's upcoming Lunar New Year break could be the catalyst for a correction, said Alastair Munro, senior base metals strategist at brokerage Marex.
The current market trajectory can be compared to that of 2004-2006, when China purchased copper as part of its industrialization, he added.
“Then we saw very similar movements that ended in a correction from February 6, 2006.” – he added. “In that case, we'll make it to the end of the month.”
Source: Reuters, PAP Biznes
