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Gold, copper tumble as Europe rattles markets

Kuala Lumpur, October 20, 2011

Copper and gold led a commodities plunge on Thursday as escalating worries about Europe's inability to resolve its debt problems drove investors away from riskier assets.

Plans to tackle the euro zone debt crisis have stalled with Paris and Berlin at odds over how to increase the firepower of the region's bailout fund, French President Nicolas Sarkozy said on Wednesday.

Comments by the Federal Reserve that the US economic outlook grew dimmer in September further reinforced the dismal global economic view.       

London copper dropped for a fourth straight day, while gold was on track to see its biggest daily decline in two weeks.
 Brent crude hovered near $108 a barrel and grains extended losses.

Three-month copper on the London Metal Exchange  tumbled 4 percent to $6,928.75 a tonne. Prices are headed for a drop of almost 8 percent this week after two consecutive weeks of gains.

Spot gold lost as much as 2 percent to a two-week low of $1,609.24 an ounce. US gold dropped more than 2 percent to $1,611.20 an ounce, on course for its fourth day of decline.

The most-active gold futures contract on the Shanghai Futures Exchange dropped 2.3 percent to 332.66 yuan per gram, or $1,624.13 an ounce.     

Technical outlook for spot gold has turned bearish and bullion may fall to $1,596 during the day, said Reuters market analyst, Wang Tao.       Spot platinum dropped 2.8 percent to $1,468.5 an ounce.


'The euro zone crisis does remain a key concern for the financial markets and there are murmurs that the Chinese economy could be facing some headwind,' said Luke Mathews, a commodity strategist at Commonwealth Bank of Australia in Sydney.

China's economy is set to slow more sharply than previously thought in 2012, with economists in a latest Reuters poll growing more pessimistic about how much a global downturn will impact the world's manufacturing engine.         

The outlook for metals remained dour, underscrored by a cut in sales forecasts for next year by Freeport-McMoRan Copper & Gold Inc's . The world's biggest publicly traded copper producer, facing strikes at two of its mines, cited an uncertain global economic prospect.

The most-active January copper contract on the Shanghai Futures Exchange tumbled to as low as 50,950 yuan ($7,989.024) per tonne in early trading, a 16-month low, after rising 0.4 percent in the previous session. It is on track for a 9 percent weekly loss, the biggest since week ended September
25.

'Macroeconomic concerns continue to override those of fundamentals for copper investors, with the uro zone crisis being the chief worry,' said Eric Liu, a trader at CITIC Newedge in Shanghai.   

'The Fed's comment about dimmer US economic outlook weigh down on sentiment but the main reason was Germany's overnight opposition to some details of the bailout funds.'     

Oil prices also edged down, but losses were checked by data showing a surprise drop in crude and petroleum product stocks in the United States, the world's biggest oil consumer, last week.

Barclays Capital, which maintained its 2012 Brent crude price forecast of $115, said the supply side of the oil market is far weaker now than it was in 2008, but even as demand has moderated, both the Opec and non-Opec supply has fallen faster, resulting in substantial inventory drawdowns through the year.     

ICE Brent for December was near $108 a barrel while US crude fell 0.4 percent to $85.80. - Reuters

 




Tags: Gold | Europe | Copper | Commodities |

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