Copper futures slump as markets brace for Greek default

Investing.com - Copper prices slumped on Tuesday, as concerns over a Greek default and the country's potential exit from the euro zone continued to dominate market sentiment.

Copper for September delivery on the Comex division of the New York Mercantile Exchange lost 3.2 cents, or 1.2%, to trade at $2.602 a pound during European morning hours after hitting a session low of $2.596, the weakest level since June 25. Futures were likely to find support at $2.590, the low from June 25, and resistance at $2.655, the high from June 29.

Greece’s bailout program was due to expire on Tuesday and without a rescue package in place Athens would almost certainly fall into arrears on a €1.6 billion loan repayment due to the International Monetary Fund later in the day.

A default by Greece would add to fears over the country’s solvency and fuel doubts over the condition of Greek banks and the collateral they use for European Central Bank loans.

Greece shut down its banking system on Monday, with lenders ordered to stay closed for six days, following a decision by the ECB not to extend a lifeline of emergency funding.

Athens broke off negotiations with creditors on Saturday and in a surprise move Prime Minister Alexis Tsipras called for a snap referendum to be held on July 5 on whether to accept the terms proposed by lenders for extending the country’s bailout.

European finance ministers refused a request from the Greek government to extend the bailout program until after the referendum.

A yes vote will mean that Greeks are willing accept the latest reforms offered by creditors to Athens, while a rejection will likely lead to Greece's exit from the single currency union.

The euro was down 0.75% to 1.1152, falling back towards the one-month lows of 1.0953 struck on Monday after the crisis in Greece escalated.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.45% to 95.51, boosted by the weaker euro.

Elsewhere, gold futures for August delivery shed $3.00, or 0.25%, to trade at $1,176.00 a troy ounce, while silver futures for September delivery declined 2.7 cents, or 0.17% to trade at $15.66 an ounce.

Gold prices have weakened in recent weeks amid indications that the U.S. economy is regaining strength after a recent bout of weakness, supporting the case for higher interest rates later this year.

Data released Monday showed that pending home sales in the U.S. rose to the highest level since 2006 in May.

Expectations of higher borrowing rates going forward is considered bearish for gold, as the precious metal struggles to compete with yield-bearing assets when rates are on the rise.

Later Tuesday, the U.S. is to publish a report on consumer confidence for June.