LONDON: Copper prices touched a near six-month low on Tuesday as speculators boosted bearish positions on worries of recession and weak demand in top metals consumer China.
Three-month copper on the London Metal Exchange (LME) was down 0.3% at $8,100 a tonne by 1600 GMT, after hitting its weakest level since Nov. 29.
“The short-term outlook has deteriorated with recession risks in Europe and the US, and a Chinese recovery that has not been commodity intensive,” said Ole Hansen, head of commodity strategy at Saxo Bank, Copenhagen.
“We’re trading well below the 200-day moving average and we’ve struggled to regain that level, which is an invitation for additional short-selling to hit the market as we saw today,” Hansen said.
The 200-day moving average, currently at $8,370 a tonne in LME copper, is a key indicator used by traders.
If LME copper fails to move above that level, it is likely to move down to the next support area around $7,850, Hansen added.
The discount of LME cash copper to the three-month contract has soared to $70 a tonne, the most in over 30 years, indicating healthy near-term supplies. That compares to a premium of $7.25 in mid-April.
Also pressuring metals was a firm dollar, which touched a six-month high against the yen, as expectations grew that US interest rates would remain higher for longer, while the debt-ceiling impasse kept risk sentiment fragile.
A strong dollar index makes commodities priced in the US currency more expensive for buyers using other currencies.
LME aluminium eased 1.5% to $2,230 a tonne after more than 20,000 tonnes of metal arrived in LME warehouses in Gwangyang, South Korea. Among other metals, LME nickel declined 1.7% to $21,050 a tonne, zinc fell 2.7% to a 31-month low of $2,365, lead lost 0.4% to $2,078.50 and tin slid 3.1% to $24,170.
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