Copper posts biggest weekly loss
Feb 24 2013
Rise in dollar, worry over global recovery put pressure on metal prices
Three-month copper on the London Metal Exchange closed at $7,805 a Tonne on Friday, down from $7,860 at the close on Thursday. It earlier fell to its lowest level since December 21, at $7,796.
The metal used in power and construction had fallen 4.8 per cent so far this week, its biggest weekly fall since mid-December 2011, after suffering its biggest single-day slide of 2013 on Thursday.
Putting further pressure on metals prices was a rise in the dollar against the euro. A stronger dollar makes commodities priced in the US currency more expensive for holders of other currencies.
“We saw an initial price recovery when trading started this morning, but it seems there is risk-off sentiment,” Commerzbank analyst Daniel Briesemann said, adding that, overall, fundamentals are intact and that he did not expect the price dive to be sustained.
“We expect significantly higher prices for almost all the commodities for this year,” he said.
US Federal Reserve officials are likely to press on with their bond-buying stimulus programme, even though some harbour concerns that the purchases could fuel an asset bubble or inflation if pushed too far.
However, a succession of US economic data on Thursday, from claims for jobless aid to factory activity and consumer prices, pointed to a still tepid recovery and supported the argument for the US Federal Reserve to maintain the stimulus.
President Barack Obama spoke to Republican congressional leaders on Thursday in the first sign of movement to head off across-the-board government spending cuts that could take effect in a week.
In Asia, traders were interested in buying copper intraday, but with much of China’s industry yet to ramp up from the Lunar New Year holiday any rebound in metals next week could prove fragile, they said.
“While the complex looks well wounded and many are expecting further weakness, the right kind of buying has begun to emerge and we would think the complex won’t fall much further,” RBC Capital said in a note.
“Trying to catch the proverbial falling knife is always a challenge and we are just starting to see the bulls emerge, so we would expect volatility to remain elevated for some time.”
“Sentiment is taking a bit of a knock from the investment flows that we have seen from Asia. The impression that we get is that investors in Asia are a bit more negative about growth prospects for the US and Europe and as a result are concerned about export demand,” said Gayle Berry, an analyst at Barclays.
“And it is going to take a little while before we see whether or not some of the better economic data coming out of China translates into better metal demand.” zz