By Jack Farchy
Published: April 29 2010 11:21 | Last updated: April 29 2010 11:21
Base metals slid further on Thursday morning as the crisis in the eurozone and fears of tighter Chinese policy weighed on sentiment.
But jitters over eurozone stability and the mooted bail-out package for Greece continued to buoy gold, which in mid-morning trading in London was just short of the 4-month peak it hit on Wednesday.
China said on Thursday that it would unveil a reform of its system of taxes for natural resources later in the year.
The markets for metals and bulk commodities are extremely sensitive to any hint that China may be tightening policy or that demand growth in the country may be slowing. The world’s fastest-growing large economy has been by far and away the main driver of demand for base metals and bulk commodities – such as iron ore and coal – since last year.
Aluminium for delivery in three months fell 0.4 per cent to $2,205.75 a tonne on the London Metal Exchange, and copper dropped 0.6 per cent to $7,422.75 a tonne. The red metal has now suffered a 4.8 per cent correction since Tuesday.
Spot gold was 0.3 per cent stronger at $1,169.85 a troy ounce.
Successive credit rating downgrades of Greece, Portugal and Spain on Tuesday and Wednesday boosted gold, perceived as a safe haven, but pushed industrial metals lower as investors unwound their positions.
But traders and analysts said that fundamental demand from physical consumers of the metals remained strong.
Emerging markets, in particular China, have been the main driver of commodity prices in recent months.
But these countries were “not really impacted by the Greek crisis”, said David Wilson, metals analyst at Société Générale. The fall in prices in recent days was “purely driven by a flight out of risky assets to safe havens”, he added.
Elsewhere on Thursday, Nymex June West Texas Intermediate crude gained 75 cents to $83.97 a barrel. ICE June Brent, the European benchmark, was 77 cents higher at $86.93.
