The contrasting fortunes of copper and gold over the past few months illustrates the renewed concern over the global economy. The precious metal is regarded as a store of wealth in troubled times, while the red metal is the bellwether of economic performance. Gold recently touched a four-month high whereas the price of copper has fallen throughout the June quarter so far.
Gold prices reached a new four-month high of US$1,344/oz on Friday (just US$3 shy of February's 10-month peak) as the US currency weakened following very disappointing jobs statistics. Instead of adding 185,000 jobs, as analysts had expected, US non-farm payrolls expanded by only 75,000 jobs last month.
In the UK, the precious metal ended the week 4.3% higher at US$1,336/oz but fell back below US$1,330/oz at the start of this week. In sterling, gold reached £1,054/oz last week, and is currently trading around £1,040/oz. In Australia, gold touched an all-time high of A$1,918/oz last week, and is still trading above A$1,900/oz today. The price was helped by a cut in Australia's main interest rate to a record low of 1.25% to stimulate an economy that is growing at its slowest pace in almost a decade.
Although the dollar fell sharply following the US job figures (hitting 11-week lows against the Euro), the price of copper slipped 0.5% last week to close on Friday in London at US$5,800/t. This is the eighth successive weekly decline since the red metal closed at US$6,509/t on Friday, April 12.
The London Metal Exchange cash price of copper averaged US$6,438/t in April and US$6,018/t in May, with prices depressed by higher risk to the global economy because of the trade war between the US and China, and an appreciating US dollar over most of the period.
A recent report from S&P Global Market Intelligence notes that the price ratio of copper (per tonne) to gold (per ounce) has dropped from a high of 5.1 on April 17 to only 4.4 on June 4 (which is the lowest level in two years). Writing in the Commodity Briefing Service for copper, Keval Dhokia noted that the fall in the ratio highlights the relative preference for gold as a safe haven in times of economic uncertainty, whereas copper is a commodity that is widely consumed within global manufacturing.
Investors' view of the global economy is reflected in the price of all the base metals, which were weak again last week. Nickel was down 3.0%, to close in London on Friday at US$11,625/t, with zinc and iron ore (62% Fe) both down 1.7% at US$2,484/t and US$1,764/t, respectively, with aluminium 1.5% weaker at US$1,764/t.
Mining and Market News
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