Copper prices rose on Thursday even as dollar gained ground as well against most major rivals as investors await debt ceiling negotiations. 

Debt Ceiling 

White House and Congressional officials continue to hold meetings to further negotiate after the failure of the previous talks to reach a compromise on raising the debt ceiling.

US President Joe Biden will extend talks with Congressional leaders later this week in a race to a catastrophic default on debt next week.

Many sticking points remain between both sides, with US Treasury Secretary Janet Yellen reiterating warnings from a potential default on payments next June, which would threaten the credit rating for the US and tip the economy into recession.

In a sign of danger, Fitch Ratings said the US credit rating is under negative review, which might lead to a downgrade. 

Copper: An Economic Barometer 

Copper is used extensively in many sectors, and therefore it's highly sensitive to global events and growth rates, as it's used in almost everything, from homes and factories to electronics and energy production and electric cars. 

Therefore improved demand on copper usually indicates good growth rates, and vice versa. 

Copper witnessed gains in recent years during the pandemic for several reasons: 

First, the record financial stimuli worldwide provided strong tailwind to boost economic growth when closures were lifted, in turn boosting manufacturing. 

Second, a series of disruptions in mining and refining hurt supplies and cut into inventories. 

Third, a weaker dollar during the pandemic boosted copper contracts as they became cheaper to holders of other currencies.

Copper prices hit $4.80 a pound in May 2021, and a reached a peak of over $5 in March 2022. 

However, copper prices slid recently amid tight global financial conditions and concerns about subsequent global recession, with copper down 25% from its March 2022 highs. 

A resurgence in Covid 19 in China also hurt demand, while higher interest rates worldwide also played a role in dragging economic activities down worldwide. 

Otherwise, the dollar index rose 0.35% to 104.1 as of 15:17 GMT, with a session-high at 104.2, and a low at 103.8.

Copper futures due in July rose 0.7% as of 15:11 GMT  to $3.58 a pound. 

Oil prices declined in European trade on Thursday for the first time in four days off three-week highs on profit-taking while the dollar powers up against major rivals. 

The decline comes following Russian statements that hurt chances of more production cuts by OPEC+ next week. 

Such developments overshadowed recent data that showed a collapse in US crude stocks last week in a strong sign of demand.

Global Oil Prices

US crude fell 1.9% to $72.78 a barrel, while Brent fell 1.7% to $76.82 a barrel, with a session-high at $78.34. 

US crude is up 0.6% on Wednesday on track for the third profit in a row, hitting three-week highs at $74.69 a barrel, while Brent added 0.8% to $78.46 a barrel, the highest since May 2. 

Such gains were registered after Saudi Arabia's energy minister warned that short sellers "should be careful of pain".

traders took the statement as a signal OPEC+ might impose another production cut at the next June meeting.

The Dollar

The dollar index rose 0.3% on Thursday for the fourth straight session, hitting two-month highs at 104.18 against a basket of major rivals. 

A stronger dollar weighs ion dollar-denominated commodities and makes them costlier to holders of other currencies.

Dollar is riding the wave of strong US data including GDP growth data, in addition to bullish remarks by Fed officials, which bolstered the case for a 0.25% rate hike in June. 

Russian Remarks

Russian Vice Prime Minister Alexander Novak dismissed prospects of fresh OPEC+ production cuts next week, and expecting no such new steps by the oil cartel. 

US Stocks

The Energy Information Administration reported a steeo drop of 12.5 million barrels in US crude stocks last week, while analysts expected an increase of 1.9 million barrels.

Gasoline stocks are now down 2.1 million barrels to 216.3 million barrels, while distillate stocks are down 600 thousand barrels to 105.7 million barrels.

US Production 

The EIA also reported an increase of 100 thousand bpd in US output last week to a total of 12.3 million bpd, cementing the US's status as the world's stop oil producer. 

Gold prices fell in European trade for a second session, almost hitting six-week lows as dollar powered up against major rivals. 

Dollar is boosted by strong demand following bullish remarks by Fed officials, which bolstered the case for a Fed rate hike in June. 

Gold Prices Today

Gold prices fell 0.2% to $1,954 an ounce, with a session-high at $1,962 an ounce, after losing 0.9% yesterday, resuming losses after a short rebound from six-week lows at $1,952. 

Dollar

The dollar index rose 0.3% on Thursday on track for the third straight session, hitting two-month highs at 104.16 against a basket of major rivals. 

Dollar's gains come on the back of strong alternative investment demand, making dollar-denominated gold futures less appealing to holders of other currencies. 

Fed Remarks

Fed member Christopher Waller said the decision on whether the Fed will raise interest rates in June will depend on upcoming data, adding he doesn't support a pause to policy tightening until there's clear proof that inflation is heading to 2%. 

Fed Minutes

The Federal Reserve's May minutes showed the policymakers are leaning towards a pause in interest rate hikes in June amid uncertainty about US economic outlook. 

US Rates

The markets are currently pricing in a 31% chance of a 0.25% Fed rate hike in June, with a 69% chance of no change. 

Economic Data

Now investors await important data later today on US GDP for the first quarter of the year, and unemployment claims. 

Obviously strong data will boost the case for a Fed rate hike in June and underpin the greenback, in turn hurting gold prices. 

The SPDR

Gold holdings at the SPDR Gold Trust remained flat yesterday at 941.29 tones. 

The Federal Reserve's meeting minutes showed division between officials on the need for further increases to interest rates, with some members expressing the need to, and others calling for a tapering off.

The Federal Reserve decided earlier this month to raise interest rates by 25 basis points, but the minutes shed light on the divisions about the next stop, with the overall tone pointing to a pause in policy tightening. 

At the last meeting, Federal Open Market Committee officials decided to remove a major passage off the manifest, which pointed to the need to maintain current monetary policies. 

The Fed is now depending more on fresh data to decide the next move. 

Overall, members expressed uncertainty on whether upcoming policy tightening is useful, with the discussions ending with two potential scenarios: 

The first was the view of some members that inflation reduction has been unacceptably slow, and thus there's a need for more rate hikes. 

The second was the view of some members who pointed to a slowdown in growth, which necessitates a pause to policy tightening.