Copper prices fell on Tuesday as investors sold the metal ahead of a Federal Reserve meeting on monetary policy in the United States, the world's largest economy, and scrutinised rising US factory data. Benchmark copper on the London Metal Exchange closed at $6,460 a tonne from $6,550 at the close on Monday, when it rose on strong manufacturing data from the United States and China, the world's largest consumer of industrial metals.
It earlier hit a near two week low at $6,372.25. The US Federal Reserve starts a two-day meeting on Tuesday. Investors are focused on what the central bank has to say about economic growth and the future direction of benchmark interest rates.
"If the Fed reveals a bit of a bias, signalling that easy money conditions are coming to an end, that could spark another rally in the dollar and we could see another shoe-drop in commodity prices," said Edward Meir, energy and metals analyst for MF Global in New York.
Aluminium closed at $1,908 from $1,915 on Monday, after earlier touching its lowest level since October 15 at $1,883. Price prospects for the metal used in transport and packaging are weaker because Chinese producers have been ramping up output due to recent higher prices, up more than 20 percent this year. Stocks near record highs above 4.5 million tonnes and demand uncertainty will also keep a lid on aluminium prices.
"The outlook for prices remains uncertain. On the one hand, a strictly fundamental analysis of current market conditions suggests that an arguably overdue correction should bring prices closer to equilibrium," consultants GFMS said in a release. Primary aluminium for delivery in the first quarter of next year is being offered at higher premiums than this quarter however, indicating physical supplies remain tight for coming months, traders said.
But traders said the selling of metals on Tuesday in Europe could in part be because of plans by Britain's Lloyds Banking Group to raise 13.5 billion pounds ($21.99 billion) in the world's largest ever rights issue. "Investors could be selling commodities to get the cash they need to take up their shares in Lloyds," a London-based metals trader said. "But generally as well investors are still filling up on commodities."
Flows of money from long-term investors, looking to rebalance their portfolios has been a major factor behind commodity price rises this year, analysts said. Zinc ended at $2,180 a tonne from $2,195 on Monday. Lead closed at $2,270 from $2,298, nickel at $17,800 from $18,060 and tin at $14,790 from Monday's last bid at $14,775.