Base Metals Pummeled
Apr 21st, 2009 | By Doug Casey | Category: Financial NewsThe base metals were all gushing red on Monday. Copper was down from the pre-dawn hours straight through the day with only minor interruptions, finishing at its intraday low of $2.061/lb., down 9¾ cents from Friday.
Nickel followed the same path, closing at its intraday low of $5.4758/lb., down more than 25 cents. Zinc was slammed, ending at $0.6506/lb., down nearly 3½ cents. Aluminum was weak, shedding just under 2 cents, to $0.6316/lb., while lead completed the rout, dropping almost 3½ cents, to $0.6591/lb.
Copper led the industrial metals lower, falling the most in two months as the metal followed equities downward and ran counter to the rising dollar, which raises the cost of commodities transactions conducted in the currency.
“Of all the five broad commodity sectors, industrial metals have tended to have the strongest positive correlation to the S&P,” wrote Michael Lewis, an analyst at Deutsche Bank in London.
Analysts said copper slid after a surge in troubled loans at Bank of America rekindled worries about the struggling banking sector and sent investors scurrying for whatever safe haven they could find.
“Flight to quality indicators — bonds, treasuries, gold, and the dollar — all up in the same direction as fear about the economic outlook creeps back into the market,” said Frank McGhee, of Integrated Brokerage Services in Chicago.
At the same time, stockpile drawdowns continue to flash bullish signals. Copper inventories monitored by the LME dropped again yesterday, plummeting 7,300 metric tons to 462,325 tons. Stocks have declined by nearly 80,000 metric tons since mid-February.
But the big boys have moved heavily against copper. Commodity Futures Trading Commission data showed that hedge funds and other large speculators increased their net-short position in Comex copper futures by 8.4 percent for the week ending April 14. Speculative shorts outnumber long positions by 18,861 contracts.
Meanwhile, China has helped support the market by announcing a reserve-building plan will purchase 1 million tonnes of aluminum, 400,000 tonnes of copper and 400,000 tonnes of lead and zinc over the next three years.
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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.