IV:Copper futures drop to 7-week low after weak China data, Bernanke
Investing.com - Copper futures were down sharply on Thursday, hitting a seven-week low following the release of disappointing Chinese manufacturing data and amid indications the Federal Reserve said it could start scaling back its bond buying program by the end of the year.
On the Comex division of the New York Mercantile Exchange, copper futures for July delivery traded at USD3.076 a pound during European morning trade, down 2.1% on the day.
New York-traded copper prices fell by as much as 2.3% earlier in the session to hit a daily low of USD3.070 a pound, the weakest level since May 2.
Fed Chairman Ben Bernanke said the bank could begin slowing asset purchases by the end of 2013 and wind them down completely by the middle of 2014 if the economy picks up as the central bank expects.
The Fed said it expects the U.S. economy to grow between 2.3% and 2.6% in 2013. The Fed also said it expects the unemployment rate to fall to between 6.5% and 6.8% by the end of 2014 and inflation to edge closer to its 2% target.
Indications the Fed will begin to taper asset purchases sent the U.S. dollar higher across the board.
The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was up 0.7% to trade at a two-week high of 82.03.
A stronger dollar reduces demand for raw materials as an alternative investment and makes dollar-priced commodities more expensive for holders of other currencies.
Elsewhere, data on Thursday showed that China’s HSBC preliminary manufacturing purchasing managers’ index fell to a nine month low of 48.3 in June from 49.2 in May as new orders fell, indicating that the slowdown in manufacturing is worsening.
Copper traders consider shifts in the HSBC PMI an indicator of China's copper demand, as the industrial metal is widely used by the sector.
China is the world’s largest copper consumer, accounting for almost 40% of world consumption last year.
Elsewhere on the Comex, gold for August delivery tumbled 4.8% to trade at USD1,307.75 a troy ounce, the weakest level since September 30, 2010, while silver for July delivery plunged 6.3% to trade at USD20.27 a troy ounce.
