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Copper prices fell to their lowest level of 2011 on Monday as cautiousness over the inability of the eurozone to resolve its debt crisis and concerns about tighter monetary conditions in China hit sentiment on commodities markets.
Demand for the red metal is closely correlated to global economic growth as well as liquidity levels in China, which represents 40 per cent of total copper demand.
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Investors were spooked by a statement last week by Wen Jiabao, China’s premier, that the government would take measures to control inflation. The latest data on Chinese property prices, which showed overall increases for August, also raised the level of nervousness about Beijing’s attitudes to monetary tightening.
The dollar’s strength – amid pessimism about the lack of progress in Europe over the resolution of the debt problems – was another reason to take profits in commodities. The US currency rose over 1 per cent against the euro.
Copper for three month delivery on the London Metal Exchange fell 3.38 per cent to $8,396 a tonne, falling below this year’s previous low of $8,446.25 seen in early August. Other industrial metals were also lower with aluminium for three month delivery down 1.05 per cent to $2,350.
Crude oil prices eased with the November ICE Brent down 41 cents to $111.81 while the Nymex lost $1.17 to $86.79.
Gold gained ground, but seemed to lose some of its lustre as a haven asset amid the dollar’s appreciation. Bullion rose 0.27 per cent to $1,815.69 a troy ounce. With annual conferences of two leading gold industry gatherings this week, the yellow metal could find support in positive news flow. The London Bullion Market Association’s annual conference in Montreal starts today, while the Denver Gold Forum also gathers this week.
Edel Tully, precious metals strategist at UBS, said “the lack of market participants at their desks today and tomorrow may add to liquidity constraints and exaggerate price action”.
