Is Copper's Recent Tug-o-War A Sign The Metal Has Peaked?
In early trade Tuesday, better than expected US home data buoyed copper on the COMEX after dipping for four straight sessions. But, the ascent was just a blip with the upside being limited by a lack of positive economic indicators.
By Leia Michele Toovey- Exclusive to Copper Investing NewsIn early trade Tuesday, better than expected US home data buoyed copper on the COMEX after dipping for four straight sessions. But, the ascent was just a blip with the upside being limited by a lack of positive economic indicators. The metal's upside is largely being limited by Chinese demand concerns. In 2009, China's aggressive stimulus programs were largely responsible for copper's swift rebound; but as the nation has taken steps to tighten monetary supply analysts have been left wondering what is next for the red metal. Last week, the market anticipated February trade data out of China. Surprisingly, the data was palatable. China's refined copper imports in February rose 12 percent on the month to 220,530 tonnes. However, inflation reports were not so rosy. In February, the nation's inflation hit the highest point witnessed in 16 months. This has traders wondering how much more tightly the government will clamp down on monetary policy. Dropping crude prices and a strengthening greenback reduced the metal's appeal as a hedge against inflation; and the failure of the EU to come up with a solution for debt-embattled Greece also contributed to copper's four day slump. Europe's stalemate over possible aid for Greece deepened as European Central Bank President Jean-Claude Trichet spoke out against offering low-interest loans that the Greek government has requested. Copper for three-month delivery on the London Metal Exchange traded at $7,360 a tonne at 1124 GMT from a close of $7,435 on Friday. By 1044 GMT, copper for three-month delivery on the London Metal Exchange traded at $7,447.25 a tonne from $7,450 at the close on Monday. The metal continued trading flat as the day wore on. One analyst from Barclay's Capital claimed: "The market is waiting for direction. It is waiting for some sort of convincing data flow...what is happening just now, is that we're getting a lot of mixed messages — that's why you are seeing this push and pull." Rising global interest rates, uncertainty over a stable Euro-zone, tight credit, and an erratic dollar have all added up to keep the metal range-bound. Many analysts insist that without a significant force to drive the metal in one direction or another range-bound will be the story for the coming months.