Copper futures prices rally on optimistic demand outlook driven by China's stimulus measures

Copper prices got off to a stronger start this month, despite the strength of the U.S. dollar (USDX) on Friday. This rise was supported by improved demand prospects, driven by China's latest measures to revitalize its struggling property market.

The continuous futures contract for copper on the NYMEX was up close to 1.5% as of 6 a.m. EDT on September 1, as per Marketwatch data. Copper futures have continued their upward trajectory, having surpassed the $3.8 mark and reaching their highest level since August 7.

To assist homebuyers, China's central bank and financial regulator issued notices on Thursday that eased certain borrowing rules. These measures included reducing the existing mortgage rate for first-time homebuyers and lowering the down payment ratio in specific cities.

In addition to these actions, a private-sector survey on Friday revealed that China's factory activity unexpectedly returned to growth in August. This improvement was attributed to enhancements in supply, domestic demand, and employment, indicating that the government's efforts to stimulate economic growth may be yielding results.

Beijing has implemented various measures to rejuvenate its troubled property market, including the recent reduction of mortgage rates for first-time homebuyers and down payment requirements in select cities. Furthermore, the central bank announced a decrease in the foreign exchange reserve ratio to address yuan depreciation.

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Copper futures forecasts: India poised to offer support to global copper market

Analysts at New Zealand lender ANZ have noted that global copper demand is expected to benefit from the electric vehicle market and the rapid growth of the Indian economy. They anticipate that India's demand for copper will exceed 1.5 million tons by 2025, representing a 40% increase from 2022 levels.

The copper futures market received support from a weakening U.S. dollar, which appeared poised to end a six-week winning streak against major currencies. A depreciating dollar makes metals priced in U.S. dollars more affordable for holders of other currencies.

As noted by ANZ commodities strategist Daniel Hynes:

"Strong growth from India may provide some support [to the copper market]. Economic growth picked up to 7.8% y/y last quarter, its fastest in 12 months. This will help see copper demand growth nearly double this year compared with the five years prior to the pandemic. This will be amplified by a ramp up in the electric vehicle sector. The impact of this on copper and other critical minerals will be amplified by India’s push to electrify its bus network. We now expect copper demand to exceed 1.5mt in 2025, up 40% from 2022. This places it just behind the US and as the third largest consumer of the metal in the world.”

In its most recent copper futures price prediction, economic data aggregator Trading Economics anticipated the potential closing price for copper at the conclusion of this quarter at approximately $3.85 per pound. Looking ahead, the platform’s projections, which are based on global macro models and analysts' expectations, suggest that the commodity may reach $4.09 per pound within the next 12 months.

When considering copper futures copper for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss. Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.