Copper Drops Into Danger Zone

By Commodity HQ  APR 18, 2013 10:55 AM

Though gold took the spotlight, metals across the board have seen steep losses lately, including copper, with futures prices at their lowest level since October 2011.

 


Metals across the board have suffered steep losses in recent days, with gold’s alarming 9% one-day drop rattling the markets and investor confidence. And while gold remains one of traders’ top concerns, another metal’s volatile movements have been raising some red flags. Yesterday, copper futures for April delivery tumbled 3.6% to $3.1880 per pound, marking the lowest level since October 2011. The metal has almost dropped 20% from its most recent high, so the probability of copper entering bear territory is quite likely.

Copper falling below key support levels is of great concern to investors, as this metal is often considered a barometer for the global economy. And though yesterday’s decline was sparked by the IMF’s downgrade of global growth projections, weakness in other corners of the market has led many to scale back demand outlooks for the metal.

China and Eurozone Weigh Heavily on Copper

This week, disappointing Chinese data sent copper into a tailspin, as the behemoth economy and the world’s largest consumer of copper reported GDP figures that missed the mark; economic growth in the first quarter came in at 7.7%, while analysts were expecting GDP growth to be 8%. Adding to these concerns, Moody’s also changed its outlook for China from  positive to stable.

Economic reports from the eurozone this week also put downward pressure on copper prices. New car registrations in the EU fell for the 18th straight month in March, logging in a 10.2% drop from a year earlier.

Perhaps the only good signs for the metal this week were Wednesday’s reports that showed US construction of new homes jumping to the highest level since the financial crisis, and industrial production rising more than expected. Next week, copper traders should pay close attention to US new home sales, which are slated to be reported on Tuesday.

Year-to-date, copper prices have fallen roughly 10%:


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Editor's note: This article by Daniela Pylypczak was originally published on Commodity HQ
No positions in stocks mentioned.