The price of copper fell to a seven-month low below $3.10 a lb in New York futures trade on Friday after a huge jump in supply of the red metal in London warehouses reinforced investors' fears of a demand slowdown, analysts said.
Copper for December delivery dropped 16.75 cents, or 5.1 percent, to close at $3.0985 a lb on the New York Mercantile Exchange's COMEX division, its lowest level on a settlement basis since January 23. The session range was from $3.0745 to $3.2550. Spot September finished at $3.1235, down 17.35 cents from the prior close. COMEX estimated final futures volume at 24,494 lots, double that of the 12,234 lots recorded on Thursday.
Open interest rose 122 lots to 76,860 open contracts as of September 4. The trading of commodities as an asset class and the large index fund buying seen over the past year may be showing signs of strain - Sterling Smith, vice president with FuturesOne in Chicago. "If in fact we are looking at index fund liquidation, it's going to be real hard to get any buyers to stand in front of it.
I think we are going to test $3.00 next week and we are going lower from there." - Smith. Copper's bearish tone rooted in the spectacular rise in London Metal Exchange-monitored warehouse stocks - analysts. LME copper stocks jumped 18,775 tonnes overnight, their biggest one-day surge in four years.
Most of the metal - 16,525 tonnes - came into Busan, South Korean warehouse, reflecting the increasingly poor state of Asian demand - MF Global analyst Edward Meir. Inventories of the metal - used in construction and power cables - were also up in Shanghai, rising 1,487 tonnes, or 8.4 percent, to 19,112. This snapped a six-week string of declines.
However, China's imports of unwrought copper and semi-finished copper products are expected to rise for the second consecutive month in August, boosted by lower domestic stocks and firmer Chinese prices. Copper, a metal whose fortunes are tied more closely to the economy than any other commodity, found additional downside pressure from weak US job numbers that reinforced fears that the American economy was near recession.
An unexpectedly steep 84,000 US jobs were lost in August and the unemployment rate hit a five-year high of 6.1 percent, underlining the weakening state of the Labour market. That weaker state weighed on the US dollar, pulling it back down from an 11-month high against the euro.
In afternoon trade in New York, the euro was up slightly at $1.4259 Earlier, it hit an 11-month low at $1.4197, according to Reuters data. Copper for three-months delivery on the London Metal Exchange fell as low as $6,860 a tonne, its lowest price since January 28, before closing at $6,900.