Base Metals in the Red – Lead Prolongs Decline as Stockpiles Soar
Jun 25th, 2008 | By Doug Casey | Category: Gold MarketThe base metals were all in the red on Tuesday. Copper rallied twice in the pre-dawn hours, then again around mid-morning, but got sold off each time and finished flat at $3.8422/lb., down less than a quarter-cent.
Nickel was up during the pre-dawn hours, but descended through the day in choppy trading to close at $9.6993/lb., down 6 1/3 cents. Zinc was off sharply at the open after a slow pre-dawn decline but recovered nicely to end at $0.8479/lb., down less than two-tenths of a cent. Aluminum touched $1.40 but fell steadily from there to just off its intraday low at $1.3736/lb., down 2 cents, while lead dropped a penny and two-thirds, to near its intraday low, at $0.8068/lb.
Traders were wary ahead of the opening of today’s FOMC meeting.
While few are predicting a change in interest rates, the market is “still nervous about policy language, and in particular, about how forceful the Fed’s inflation wording would be,” said MF Global analyst Edward Meir.
“Stronger language could send the dollar higher once again, creating more downward pressure on metals. Language about flagging growth could, in turn, open the door to further rate decreases, pressure the dollar, and send most commodities higher,” Meir said.
China is being closely watched.
“The Shanghai [copper] price still is at a discount to London, which tells us the Chinese are not very active buyers,” said Adam Rowley, of the Macquarie Group (MQG) in London. “Prices are high but without any real upward impetus.”
With economic growth slowing in the US, Japan and the Eurozone, demand for the major products that contain industrial metals such as copper — vehicles and new homes — is on the decline as well. Any demand dropoff in China would be poison for the market.
Former market darling lead continues to be the worst performer among the industrial metals. With demand for the metal used in car batteries sagging, stockpiles have more than doubled this year. Inventories monitored by the LME rose another 1,100 tons yesterday, to 96,750 tons.
Source: Base Metals in the Red - Lead Prolongs Decline as Stockpiles Soar
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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.