Copper futures hit the 6% lower circuit on MCX today during the special Budget Day trading session, extending the sharp reversal seen across global metals after prices touched record highs earlier this week.
Here are the key reasons behind today’s fall in copper:
1. Sharp profit booking after record highs
Copper had climbed to all-time highs globally earlier in the week, driven by strong speculative interest and expectations of global growth. Once prices peaked, traders moved quickly to lock in profits, triggering a swift reversal.
2. Stronger US dollar weighs on industrial metals
The US dollar strengthened after US President Donald Trump announced former Federal Reserve Governor Kevin Warsh as his choice to lead the Federal Reserve. A firmer dollar makes dollar-priced commodities like copper more expensive for global buyers, pressuring demand and prices.
3. Fading rate-cut expectations
Markets reassessed expectations of aggressive US interest rate cuts. Copper, which is highly sensitive to growth and liquidity conditions, reacted negatively as hopes of easier monetary policy began to fade.
4. Crowded positioning and leverage unwind
Copper markets had become increasingly crowded, with futures and derivatives playing a large role in the rally. As prices reversed, stop-losses, algorithmic selling, and leveraged position unwinding accelerated the fall.
5. Caution ahead of China’s Lunar New Year
Traders are also reducing exposure ahead of the China Lunar New Year holiday, when the world’s largest metals consumer shuts markets for a week. Thin liquidity and risk reduction typically amplify price swings during this period.
Why copper fell alongside gold and silver
While copper is an industrial metal and gold and silver are precious metals, all three were hit by the same forces: profit booking after parabolic rallies, dollar strength, leverage unwinding, and thin liquidity. This led to simultaneous lower circuits across metals on MCX.
The bottom line
Copper’s 6% fall on MCX today reflects a post-rally correction, driven by profit booking, a stronger dollar, fading rate-cut expectations, and crowded positioning. The move highlights how quickly industrial metals can correct after record highs, especially during volatile sessions like Budget Day.
