Copper Takes Hit as Traders Price In Higher US Rates

Copper prices took a hit on Tuesday as traders began to factor in higher US interest rates. The London Metal Exchange saw three-month copper drop by 0.5% to $13,664 per ton.

The bigger story was the shift in rate expectations: CME FedWatch, a market gauge based on futures prices, showed 38% odds of at least a quarter-point hike, up from 16% a week earlier.

When traders think policy rates could stay higher for longer, it raises the 'discount rate' markets use to value future growth and also makes borrowing money costlier. This affects commodities because holding metal in storage ties up cash, and financing inventories gets more expensive, causing prices to sag even if physical market demand is tight.

Lower oil prices can cool near-term inflation worries but signal softer risk appetite, which tends to spill over into industrial metals like copper.