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Metal Prices in Rally Mode as Trade Fears Ease; Copper Soars to 12-Week High

Investing.com | Sep 21, 2018 02:27PM ET

Copper was in rally mode on Friday.
Investing.com - Metal prices were in rally mode Friday as copper hit 12-week highs, shrugging off a strong dollar on easing trade war fears, though analysts warned downside momentum could resume.

Copper prices gained 3.87% to $2.85, zinc prices rose 2.61% to 2,524.75 and nickel futures rose 4.76% to 13,262.50.

The United States and China, earlier this week, announced tariffs at a lower rate than many had feared, helping lift sentiment on trade, easing fears escalating trade tensions would dent China's appetite for metals.

Not everyone is convinced, however, that the U.S.-China trade spat will be resolved sooner rather than later. Goldman Sachs (NYSE:GS) said the trade dispute between the two nations is in its infancy, warning that Washington may take further action against Beijing in "the next couple of weeks."

"Additional tariffs (from the United States) are the most likely outcome, as the policy issues underlying the dispute will be difficult to resolve, the bilateral trade deficit at the heart of the dispute is unlikely to narrow substantially regardless of policy actions, and the White House will have greater political flexibility to increase tariffs after the midterm election," Goldman Sachs said in a note.

Some analysts, meanwhile, warned against reading too much into the surge in copper prices Friday, warning that the prevailing trend was more bearish than bullish.

"For now we can characterise it as a relatively small correction following a big downtrend."

The rise in metals comes despite a resurgent dollar as traders reined in bets on emerging-market currencies, while a slump in the pound also bolstered the greenback.

The U.S. dollar index, which measures the greenback against a trade-weighted basket of six major currencies, rose 0.41% to 93.85.

Dollar-denominated assets such as commodities are sensitive to moves in the dollar. A fall in the dollar makes them cheaper for holders of foreign currency, raising demand.

In precious metals, gold prices fell on fears that the yellow metal would come under pressure ahead of a widely expected Federal Reserve interest rate hike due next week.