Base Metals Drop
Jul 1st, 2009 | By Doug Casey | Category: Politics & EconomicsThe base metals were all seeing red on Tuesday. Copper held in positive territory until mid-morning, then capsized, sinking to the noon hour, before then righting the ship and adding a little back to finish at $2.2556/lb., down 5 1/3 cents.
Nickel held up a bit longer than copper, but it too nosedived in the late morning, falling below the $7 mark to close at $6.9188/lb., down more than 18 cents. Zinc plummeted as well, but it pared its losses late, ending at $0.6852/lb., down three-quarters of a cent. Aluminum was modestly lower, dropping just over a half-cent, to $0.7221/lb., while lead completed the down day, shedding nearly a penny, to $0.7607/lb.
Copper led the industrial metals lower yesterday, falling the most in a week as Monday’s optimism faded. Traders noted the decline in consumer confidence and the modest selloff in the dollar, and concluded that the ‘green shoots’ may still be stunted.
“A lot of people think that the dollar can go even higher now, and that happening when fundamentals are still weak leaves copper vulnerable,” said Matthew Zeman, a LaSalle Futures Group trader in Chicago. “I wouldn’t be surprised to see a pretty hefty correction in copper.”
Also factoring in was the normal re-balancing that happens this time of year. As Michael Gross, futures analyst with Optionsellers.com in Tampa, Florida put it, “Copper succumbs to broader losses in the commodity complex as funds unload at the end of the second quarter.”
Gross also chipped in with a technical analysis, saying that there is a “classic head and shoulders top formation in the copper market right now. A combination of fund selling and a strong technical set-up could mean further price correction.”
And a fundamentalist agreed. “From a fundamental point of view, copper is fully priced during this stage of the economic cycle,” said Neil Buxton, managing director at London-based GFMS Metals Consulting Ltd.
Stockpile data was, however, supportive, as inventories monitored by the LME declined another 1,350 metric tons yesterday, to 265,950 metric tons.
And Chile, the world’s leading copper producer, said production fell off 2.3% in May, year over year.
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Doug Casey is a contrarian investor, sought-after public speaker and author of several books. His work "Crisis Investing" held the position of # 1 bestseller on the New York Times list for 26 consecutive weeks. Doug's unusual views on the economy - and just about everything else - have gained a huge following in the investment community, and it certainly helps that his stock recommendations of undervalued junior exploration companies have made his subscribers millions. Now in its 27th year, Doug's monthly newsletter, the International Speculator, is one of the most established and esteemed publications on gold, silver and other natural resource investments. Together with the Casey Energy Speculator, it covers a broad range of carefully selected stocks with the very real potential of double- and triple-digit returns within 12 to 24 months.