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Copper futures slide to 5-month low on China economic concerns

Published 10/01/2014, 03:18 AM
Updated 10/01/2014, 03:18 AM
Copper slumps to 5-month low amid cloudy China economic outlook

Investing.com - Copper futures fell to the lowest level in more than five months on Wednesday, amid ongoing concerns over the health of China's economy.

On the Comex division of the New York Mercantile Exchange, copper for December delivery fell to a session low of $3.000 a pound, a level not seen since April 15.

Prices recovered to last trade at $3.011 a pound during European morning hours, up 0.4 cents from a closing price of $3.007 on Tuesday.

Futures were likely to find support at $2.998, the low from April 15, and resistance at $3.060, the high from September 30.

Data released earlier in the day showed that factory growth in China held up last month but remained subdued, indicating a recovery in the broader economy remains fragile and may need further government stimulus.

China’s official manufacturing index held steady at 51.1 in September, unchanged from August and broadly in line with market expectations.

China is the world's largest copper consumer, accounting for nearly 40% of global demand.

Investors were looking ahead to the latest U.S. employment report, due for release on Friday, for further indications on the strength of the recovery in the labor market, a key factor in deciding the future path of monetary policy.

Expectations that the Federal Reserve is growing closer to raising interest rates have boosted the dollar against the euro and the yen, as the European and Japanese central banks look likely to stick to a looser monetary policy stance.

The Dollar Index, which tracks the performance of the greenback versus a basket of six other major currencies, traded at 86.08, not far from the previous session's four-year high of 86.33.

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A stronger U.S. dollar usually weighs on copper, as it dampens the metal's appeal as an alternative asset and makes dollar-priced commodities more expensive for holders of other currencies.

The industrial metal lost 4.8% in September amid indications China's economy is losing momentum and as a broadly stronger U.S. dollar dampened the appeal of dollar-denominated commodities.

Elsewhere on the Comex, gold for December delivery dropped $4.30 to trade at $1,207.30 a troy ounce, while silver for December delivery shed 4.9 cents to trade at $17.00 an ounce.

Gold futures sank nearly 6% last month, while silver prices tumbled 13% amid speculation that the Federal Reserve could raise interests sooner and faster than previously expected.

Gold and silver cost money to store and struggles to compete yield-bearing assets when interest rates are on the rise.

Later in the day, the U.S. was to release the ADP report on private sector job creation, as well as a report by the Institute of Supply Management on manufacturing activity.

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