Copper continues to be tarnished

Prices drop on weak economic data and strong dollar

Copper prices ended lower on Wednesday, 11 August 2010. Prices dropped due to weak economic data and strong dollar.



At USA, copper futures for September delivery ended lower by 5.85 cents (1.8%) at $3.254 a pound on Wednesday. Copper gained 1% last week. For the month of July, copper ended higher by 12% as concerns about a slowdown in the global recovery abated, pushing the red metal to its best month since April 2009.

Before this, 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 higher by 2.8%. On a yearly basis, copper has gained 18%.

On Wednesday, at LME, copper for delivery in three months ended lower by $100 (1.4%) at $7,200. 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 weighs the strength of the dollar against a basket of six other currencies, rose by a huge 1.9%.

In the latest FOMC statement issued yesterday, according to the Fed, the economic recovery is likely to be more modest in the near term than had been anticipated. The latest statement also indicated that the target range for the federal funds rate will remain at 0.00% to 0.25% and that low resource utilization and subdued inflation are likely to warrant exceptionally low levels of the fed funds rate for an extended period.

The Commerce Department in US reported on Wednesday, 11 August 2010 that US trade deficit expanded by 18.8% in June, reaching $49.9 billion from $42.0 billion in May. The nation's trade deficit widened sharply in June on record imports of consumer goods. The widening of the deficit was much larger than expected. Market had expected the June deficit to hit $42.5 billion.

In June, imports increased sharply while exports declined. Imports rose 3.0% to $200.3 billion during the month, while exports fell 1.3% to $150.5 billion. Imports of goods alone jumped 3.3% to $167 billion, with the largest increase from imports of consumer and capital goods. Meanwhile, exports of goods alone slipped 2.2% to $105 billion, with exports of farm products at the lowest since September 2009. However, auto exports were the highest since October 2008, while exports of civilian aircraft rose slightly.

The U.S. buys about 13% of the 17 million metric tons of copper sold annually and China buys about 20%. Copper fell for three months in a row through June on concern about efforts to curb growth in China, the world's biggest user of the metal.

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 for August delivery ended lower by Rs 2.1 (0.63%) at Rs 337.2/Kg. Prices rose to a high of Rs 341/Kg and fell to a low of Rs 335.8/Kg.

Among other metals traded in the LME on Wednesday, lead ended 0.9% lower at $2,105 a ton and zinc ended 1.3% lower at $2,090 a ton. Nickel ended 1.1% lower at $21,954. Aluminum ended 0.8% lower at $2,153 a ton.