Copper Prices Plummet Amid US Budget Talks and EU Debt Concerns

Strategic Insights -

Copper prices have seen a sharp decline amid growing concerns over the US budget talks and the simmering EU debt crisis. The US congressional supercommittee's inability to reach a budget deal has triggered fresh worries about government debt, leading investors to shy away from assets linked to economic growth, such as copper and stocks. The December copper contract on the Comex division of the New York Mercantile Exchange has retreated by 9.65 cents, or 2.8%, to $3.3055 a pound. Thinly traded November-delivery copper has also declined by 7.10 cents, or 2.1%, to $3.3310 a pound.

Key Takeaways:

  • The US congressional supercommittee's failure to reach a budget deal has triggered a 2.8% decline in December copper prices to $3.3055 a pound.
  • Thinly traded November-delivery copper has declined by 2.1% to $3.3310 a pound.
  • Investor sentiment was further weakened by weaker European stock markets and high Italian and Spanish bond yields.
  • Copper prices are sensitive to currency movements, and a stronger greenback makes copper futures seem more expensive to buyers holding other currencies.
  • Goldman Sachs expects copper prices to rally due to a tightening copper market, with prices projected to rise to $9,000 a metric ton ($4.08/lb) over the next six months.
  • The market could be even tighter if the strike at Freeport McMoran Copper & Gold Inc.'s Grasberg mine in Indonesia remains unresolved.

Statistics:

  • Copper prices have declined by 9.65 cents, or 2.8%, to $3.3055 a pound.
  • Thinly traded November-delivery copper has declined by 7.10 cents, or 2.1%, to $3.3310 a pound.
  • The ICE Dollar Index was recently at 78.382, up 0.5%.
  • Goldman Sachs expects copper prices to rise to $9,000 a metric ton ($4.08/lb) over the next six months.

Sources:

  • Dow Jones Commodities News (via Comtex), November 21, 2011.
  • Dow Jones Newswires, November 21, 2011.