BLBG: Copper Drops, Erasing Gains, on Speculation Rally Went Too Far
Copper dropped, erasing earlier gains, on speculation that a recent rally drove prices too high amid a still-weak U.S. economy.
The U.S. jobless rate jumped to 8.9 percent in April, a 25- year high, with 13.7 million workers unemployed, the Labor Department said today. Copper output will top use for a second year in 2009 as the global recession curbs demand, analysts at RBS Global Banking & Markets said. Before today, copper rose 54 percent this year on speculation that the economy will rebound.
“We’ve seen some better reports, but the economy is still weak and we’re not seeing the pick-up in industrial production that will spur the buying of copper,” said Gijsbert Groenewegen, a partner at Gold Arrow Capital Management in New York. “It’s time to take some money off the table.”
Copper futures for July delivery fell 1.1 cents, or 0.5 percent, to $2.1535 a pound at 11:20 a.m. on the New York Mercantile Exchange’s Comex division.
Earlier, the metal climbed as much as 1.9 percent after the unemployment report showed fewer jobs were lost in April compared with March, spurring economic optimism.
Payrolls shortened by 539,000 employees, compared with a decline of 699,000 in the March, the Labor Department said. Economists projected a loss of 600,000 jobs last month, the median estimate of 70 surveyed by Bloomberg News.
“The market is being supported by the optimism that the worst of the downturn may be behind us,” said John Gross, the publisher of the Copper Journal and president of J-E Gross & Co. in Newport, Rhode Island. “It’s not that growth is much stronger now, but we’ve seen signs that the decline has abated.”
Increase for Week
Copper still is headed for a second-straight weekly gain as inventory declines spurred speculation that demand is buoyant in China, the world’s biggest metals user.
Stockpiles monitored by the London Metal Exchange dropped 1.2 percent today to 389,000 metric tons, the lowest since mid- January. Supplies tallied by the LME have fallen for five straight weeks, the longest string of declines since May 2008, when the price was heading to a record.
For copper prices, “a correction is quite possible over the summer months as Chinese buying eases off,” RBS analysts in London said in their report. “We expect copper and other metal prices to rise further later in 2009 and through 2010.”
The price will average $1.90 a pound this year and will increase to $2.50 a pound in 2010, RBS forecasts. That compares with an average of about $3.12 a pound in 2008. Copper production will exceed demand by 25,000 metric tons this year, RBS estimates.
On the London Metal Exchange, copper for delivery in three months dropped $5, or 0.1 percent, to $4,705 a ton ($2.13 a pound). The price reached a record $8,940 on July 2.
