COMEX CLOSE – Dovish Fed comments spurs commodities comeback

Copper futures recouped earlier losses and posted a modest gain on Monday as dovish comments from a Federal reserve official make an interest rate hike next week less likely.

Copper for December delivery on the Comex division of the New York Mercantile Exchange closed up 0.75 cents at $2.10 per pound. Trade ranged from a 2.064 to $2.10.

In precious metals, the most-active Comex gold contract was last at $1,332.70 per ounce, down only $2.40 and well above the session low of $1,321.00.

The main market moving event today was a speech by Federal Reserve governor Lael Brainard, who warned that it would be a mistake to raise interest rates too quickly and advocated for “prudence in the removal of policy accommodation.”

“My main point here is that in the presence of uncertainty and the absence of accelerating inflationary pressures, it would be unwise for policy to foreclose on the possibility of making further gains in the labour market,” Brainard said.

Shortly after these comments were released, the CME Group FedWatch tool put the odds of a September rate increase at just 12 percent. This was down from 21 percent earlier in the day and 30 percent last Friday.

In recent weeks, various Fed members have outspokenly championed a near-term rate hike despite uneven US data and questions over the health of the global economy. So Brainard’s comments today represent a noticeable change in tone. 

“She resurrected some of the concerns for why the Fed shouldn’t raise rates,” Quincy Krosby, an analyst at Prudential Financial, said on CNBC. “We now go back to a thesis where the Fed wants to raise rates for other reasons.”

Meanwhile in the wider-markets, the dollar was 0.12 percent stronger at 1.1246 against the euro, while the Dow Jones industrial average and S&P 500 both reversed earlier losses and were up 1.1 percent and 1.26 percent respectively. Light sweet crude (WTI) oil futures were up 40 cents, or 0.87 percent, at $46.27 per barrel.

Attention will now switch to the Chinese industrial production and retail sales data set for release tomorrow, which are forecast to be unchanged.

Markets in China will be closed on Thursday and Friday for the mid-Autumn festival.

(Additional reporting by Dalton Barker) 

Will Adams

About Will Adams

William Adams has been involved in the metals markets since 1982 – he has experience in many areas of the market from researching to trading and has worked in London, New York and Tokyo.