Base metals, which are used heavily in construction and manufacturing, act as the necessary building blocks or raw materials for everything in a wide range of industires. Investors often look to industrial metal price moves as a barometer, notably the so-called Doctor Copper, for the health of the global economy and growth in China, the world’s largest commodity consumer and second largest economy.
Observers argued that signs of caution from the Federal Reserve over the pacing of further interest rate hikes have helped weaken the dollar, which makes it cheaper for foreign buyers to purchase USD-denominated commodities. Furthermore, the Chinese government has helped restore confidence in the economy’s outlook through a number of stimulus measures.
“We expect further Chinese stimulus to lead to a gradual recovery in demand” for base metals, Jefferies analysts said in a note this month, adding that it should be enough to push the copper market and other commodity markets into deficit, pushing prices higher.
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