Base metals tarnish

Prices end lower following Fed's latest take on the US economy



Copper prices ended lower at Comex on Wednesday, 14 July 2010. Prices fell after Federal Reserve revised the US GDP growth for 2010 and 2011 downward.

At USA, copper futures for September delivery ended lower by 1 cent (0.2%) at $3.01 a pound on Wednesday. Last week, copper ended higher by 4.7%. For second quarter, copper dropped 16%. Copper gained about 6% for the first quarter, buoyed by data from the U.S. and other countries reinforced expectations that the global economic recovery was on track. On a year to date basis, in 2010, copper is lower by 9.8%.

On Wednesday, at LME, copper for delivery in three months ended lower by $35 (0.5%) at $6,651.5. Prices had crossed the $8,000 mark for first time since 2008 on 6 April. On 3 July, 2008, prices had touched an all time intra day high of $8,940. Copper ended FY 2009 higher by 140%.

In the currency market on Wednesday, the dollar index, which measures the strength of the dollar against a basket of six other currencies fell by 0.3%.

In the latest FOMC meeting, Fed indicated that real US GDP for 2010 is now expected to range from 3.0% to 3.5%, which is down from the previous range of 3.2% to 3.7%, while the projection for 2011 GDP ranges from 3.5% to 4.2% after it had previously ranged from 3.4% to 4.5%. As for unemployment, the 2010 projection rate ranges from 9.2% to 9.5% after it had ranged from 9.1% to 9.5%. The expected unemployment rate for 2011 ranges from 8.3% to 8.7% after it had ranged from 8.0% to 8.5% before. FOMC members agreed that it would be appropriate to keep the target federal funds rate at a range of 0.00% to 0.25%. Crude pared its earlier gains following these comments.

The U.S. buys about 13% of the 17 million metric tons of copper sold annually and China buys about 20%.

Copper ended substantially higher last year on expectations of revived global economic growth along with a decline in the dollar. The dollar index had dropped almost 4.2% last year. The metal was also pushed higher by record first-half imports to China, the world's largest user.

At the MCX, copper prices ended lower by Rs 0.5 (0.01%) at Rs 311.25/Kg. Prices rose to a high of Rs 315.5/Kg and fell to a low of Rs 310.55/Kg.

Among other metals traded in the LME on Wednesday, lead ended 0.7% lower at $1,812 a ton and zinc ended 1.2% lower at $1,843 a ton. Nickel ended 0.4% lower at $19,475. Aluminum ended 0.1% lower at $1,993 a ton