Copper prices enjoyed their best day in more than 18 months Friday as concerns about the impact of trade tensions on the global economy continued to ease.
The price of metal for September delivery jumped 4.24% to $2.8365 a pound on the Comex division of the New York Mercantile Exchange, its single best session since February 2017.
Friday’s run also helped the metal post its best performance in a single week since November 2016, with copper climbing almost 8% for the week.
The recovery continued to unwind some of the damage since June, when threats of tariffs between the U.S. and China stoked concerns about their impact on economic growth. From a peak of $3.293 a pound in June, copper had fallen to as low as $2.557 last month.
Those concerns have eased amid continued strong economic data out of both the U.S. and China.
Before Friday’s surge, Barclays analyst Ian Littlewood said the decline of copper prices in recent months wasn’t justified given the solid fundamental backdrop for the metal.
“Improving demand, underlined by sharply increasing Chinese premia and declining stocks, provides a strong fundamental rationale for higher prices, while stretched speculative positioning looks susceptible to a short covering rally,” he said.
Copper, which is used in a range of industrial applications and electrical products, is often seen as a barometer of global economic health.
Goldman Sachs ’ commodities team said Friday that global copper demand was tracking at 2.8% growth, while Chinese copper inventories had fallen sharply in recent months amid the trade tensions.
“This week the trade war was escalated and markets shrugged it off with copper rallying. The reason is the market has already factored in an extended standoff between the U.S. and China,” Goldman Sachs said.
It was a different story for gold prices, however. The precious metal dropped back through the $1,200-an-ounce mark Friday after signs of continued strength in the U.S. economy shot the dollar sharply higher.
Gold for September delivery fell 0.83% to $1,196.20 a troy ounce on Comex, slumping in tandem with a rise in the value of the U.S. dollar.
The WSJ Dollar Index, which measures the U.S. currency against a basket of 16 others, climbed 0.35% on Friday. A stronger dollar makes dollar-denominated commodities more expensive for holders of other currencies.
Friday’s fall wiped off most of the gains made over the week, although gold still managed to finish the in the green for the second consecutive week.
Sets of gold bangles are displayed in a showcase of a showroom in Peshawar, Pakistan, in May. Gold prices dropped back through the $1,200-an-ounce mark Friday. Photo: fayaz aziz/Reuters
The fall came as Goldman Sachs formally cut its bullish price forecasts for the metal.
Goldman Sachs now forecast gold at $1250, $1300 and $1325 a troy ounce over the next three, six and 12 months, down from its previous expectations of $1350, $1375 and $1450 a troy ounce, respectively.
The Goldman analysts said the strength in the U.S. and the weakness in emerging markets were similar to conditions in the late 1990s, when gold fell toward record lows.
“From 1998 to 2000, a tech boom reduced DM [developed market] fear and boosted U.S. real rates while at the same time the Asian financial crisis wiped out EM [emerging market] wealth, pushing gold to $250 a troy ounce,” Goldman Sachs said.
“While nowhere as extreme, the same forces have been at play this year in gold.”
Elsewhere in metals, silver gained 0.38% to $14.269 a troy ounce, while aluminum rose 2.35% to $2,091 a metric ton, zinc climbed 1.67% to $2.496 a metric ton and nickel jumped 4.95% to $13,250 a metric ton.
Write to Paul Garvey at [email protected]