LONDON, Sept 22 — Copper rallied to a five-week high today as the dollar slipped after the US central bank left benchmark interest rates unchanged, though gains were limited by worries about slow demand growth.
Benchmark copper on the London Metal Exchange was up 1.3 per cent at US$4,825 (RM19,967) a tonne by 0947 GMT, having earlier touched US$4,827, its highest since Aug. 18.
The Fed left rates on hold and projected a less aggressive path for rises over the coming years. That exerted pressure on the US currency, a weakening of which makes dollar-denominated commodities cheaper for non-US firms.
“Central banks are happy to support what economic growth there is with cheap money; that’s fuel for industrial metals,” said Societe Generale analyst Robin Bhar.
“But the market will struggle to sustain rallies because demand isn’t strong ... The OECD pointed out yesterday that the next leg lower could come from global trade.”
The Organisation for Economic Cooperation and Development yesterday warned that global economic growth will flounder this year and next because of slowing trade growth.
Also expected to weigh on metals is weak demand growth in China, which consumes nearly half of all industrial metals produced.
“We may get a seasonal pick-up in physical activity in the fourth quarter, but it’s not guaranteed. It may not come through if China continues to slow,” Bhar said.
Analysts also think the uncertainty created by the US Presidential election in November could deter investment.
Elsewhere, three-month aluminium rose 2 per cent to US$1,616 from an earlier US$1,618, its highest since Sept. 2.
Zinc gained 0.4 per cent to US$2,291, lead was up 0.9 per cent at US$1,953 and tin climbed 1.8 per cent to US$19,425.
“We believe the bottom of the market for mined commodities was tested, and found, very early in 2016,” Investec analysts said in a note.
“Whilst this caught most analysts off-guard, the rally has proved to be sustainable despite many mining companies warning of difficult times to come.”
Nickel was up 0.6 per cent at US$10,525 a tonne from an earlier six-week high of US$10,550.
It has been boosted in recent weeks by worries about supplies from the Philippines, where the government is carrying out an environmental audit of mines. — Reuters