Oil Prices Push Copper and Zinc Lower Amid Dollar Strength

Copper and zinc prices have slipped due to rising oil prices and a strong US dollar. The increase in oil prices has raised inflation concerns, making another Federal Reserve rate hike more plausible.

Higher interest rates tend to cool economic activity, which can slow demand for metals used in construction, cars, and electronics. A stronger dollar also adds friction by increasing the cost of copper and zinc for buyers using other currencies.

The market has also seen small inflows of copper and zinc into London Metal Exchange (LME) registered warehouses. This has narrowed the cash-to-three-month premium in both contracts, indicating that the market is less worried about near-term shortages.