Comex copper tumbles

Comex copper futures fell sharply on Wednesday as investment funds and speculators pulled out of copper and other metals when it seemed a strengthening dollar would undermine their holdings, traders said.
Federal Reserve Chairman Alan Greenspan's suggestions that interest rates could soon rise, and therefore bolster the dollar, sparked a bout of heavy speculative selling that began in Asian markets and carried over to London and New York.
After a second day of congressional testimony, however, Greenspan left metal and financial markets with the impression that raising US interest rates was on the Federal Reserve's agenda, but did not seem imminent.
The dollar then retreated from its five-month highs against the euro, which stanched the bloodletting in copper.
Most-active May copper slid to a 10-week low at $1.2050 a lb., but edged back up to finish at $1.2275 per lb., a decline of 8.25 cents on the day. May copper began it's decent from a session high of $1.3105 a lb.
Next-most-active July futures tumbled 7.95 cents to end at $1.2285. The rest closed 6.95 cents to 8.35 cents lower.
Comex estimated final copper volume at a heavy 29,000 lot on Wednesday, nearly double on Tuesday's turnover of 14,889 lots.
Open interest fell 450 on Tuesday to 74,361 lots.
Asked if the massive speculative exodus was over in copper, one broker said, "It seems to be. After it fell, it didn't go anywhere, and buying started to emerge at the lows."
Whether the speculative rout was over for copper depended largely on the fate of the dollar, analysts said. "The commodity markets have been very sensitive to what the dollar has been doing. Obviously, they have been underpinned by weakness in the dollar. If we could see higher rates here, and the dollar starts to sustain a recovery, that has some negative implications on the metals," said David Rineheimer, director of futures research at Citicorp Global Markets.
Dollar projections depend on how much interest rates go up and when, analysts said, adding that they thought underlying fundamentals driving prices higher was still intact.
Ultimately, they said, higher interest rates would indicate a growing economy, which, in turn, implies a greater demand for industrial metals like copper.
With a chunk of the speculative element out of the copper market, some traders said they thought the recent volatility might be lessened and prices might more nearly reflect demand.