Gold Fell But Copper Prices Hit 7-Year High On Positive Demand Outlook

Armed with a vaccine, optimism for global economic recovery among markets have caused gold prices to plunges while copper soared.

Rising for the fourth consecutive day, copper price on the London Metal Exchange rose as much as 1.5% to a seven-year high of $7,511 a tonne on Friday, adding to this week's powerful surge in base metal prices.

Copper has risen about 70% from its March lows.

On the other hand, gold slipped 2% to fall below the psychological level of $1,800 an ounce for the first time since July, marking the third weekly decline. Spot gold was down 1.4% on Friday to $1,785.11 per ounce, declining 13% from its record high in August.

Economic recovery expected

"As soon as prices touched below the key $1,800 level, it triggered a sell-off. It is probable that prices might test the $1,750 level given we have a strong fundamental reason like the vaccine," said OANDA analyst Craig Erlam to Reuters.

Gold's decline quickened pace as investors continued to swap the metal for riskier assets, like stocks, looking to profit from an eventual recovery from the pandemic.

Global stocks are on track for the best month on record with valuations near the highest in about 20 years.

The precious metal is considered a safe-haven against economic uncertainties.

Green economy growth signals

The same divergence attracted investors to copper, a bellwether for the global economy and an important part of the transition to low-carbon energy resources. Wind farms, electric cars, wires and other staples of a green economy need copper- a strong conductor of both heat and electricity in electronics and wiring.

Investors are betting on the metal as major nations pledge to spend heavily to decarbonize their economy.

Last week, Prime Minister Narendra Modi said that India has set a target of reducing the carbon footprint by 30-35%, adding that the government has allocated a special fund for this purpose.

However, the major driver of copper's recent gains has been China's rapid economic rebound. China alone accounts for more than half of the world's copper imports and according to a Bloomberg report, the country's economic recovery has driven its imports to record levels this year, helping to offset lower demand in the rest of the world.

China is the only nation among the 24 major economies in the world to have reported expansion in GDP (gross domestic product) for the July-September period at 4.9%.

Moreover, there are also expectations that the US and the UK will spend generously on wind and solar industries as well as building an electric grid infrastructure.