Investing.com – Copper prices slumped on Thursday, as Chinese markets fell sharply in the last hour of trading and as the U.S. dollar strengthened broadly after the Federal Reserve left the door open for a rate hike as soon as September following its upbeat assessment of the economy.
for September delivery on the Comex division of the New York Mercantile Exchange tumbled 2.2 cents, or 0.91%, to trade at $2.385 a pound during European morning hours.
A day earlier, copper inched up 0.5 cents, or 0.21%, to end at $2.407. Futures fell to a six-year low of $2.336 on Monday.
The took investors on another volatile ride on Thursday, with shares plunging sharply in the last hour of trade amid reports that Chinese banks were investigating their exposure to the stock market.
Equity markets in China tumbled earlier this week, forcing policymakers to intervene and provide measures to boost liquidity and calm investors.
Chinese regulators pledged to buy more shares to stabilize markets, while the country’s central bank hinted at more policy easing if needed.
On Monday, the Shanghai Composite tumbled 8.5%, the biggest one-day drop since February 2007, amid reports that government buying of stocks and securities has slowed.
Market players are concerned that the plunge in the stock market could spread to other parts of the Chinese economy, triggering fears that the Asian nation’s demand for the industrial metal will decline.
China is the world’s largest copper consumer, accounting for almost 40% of world consumption last year.
Elsewhere, for December delivery dropped $8.40, or 0.77%, to trade at $1,084.90 a troy ounce, while for September delivery declined 12.3 cents, or 0.83% to trade at $14.62 an ounce.
The , which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.26% to 97.48 early on Thursday, improving from 97.08 by close of trade on Wednesday.
A stronger U.S. dollar usually weighs on gold, as it dampens the metal’s appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies.
The greenback was boosted after the Fed described the economy as expanding “moderately,” while upgrading its view of the labor and housing markets.
The central bank gave no clear indication of the timing of the next rate hike, but left itself room to act as early as September, citing “solid” gains in the job market and “additional” improvement in the housing sector.
The U.S. was to release figures on later in the day, which were expected to show that the economy rebounded 2.6%, following a 0.2% contraction in the first quarter after an unusually harsh winter.
Gold has been under heavy selling pressure in recent months amid speculation the Fed will hikes rates for the first time in nine years this autumn.
Expectations of higher borrowing rates going forward is considered bearish for gold, as the precious metal struggles to compete with yield-bearing assets when rates are on the rise.