I can understand Copper falling, but Zinc certainly wont stay down for long.
Copper Drops, Leads Metals Lower on Interest-Rate Speculation June 6 (Bloomberg) -- Copper led declines in metals on speculation central banks will raise interest rates and slow world economic growth, reducing demand for raw materials. Gold and silver also fell.
Since reaching a record on May 11, copper has tumbled 17 percent and zinc is down 14 percent, fueling speculation that this year's rally may be over. Federal Reserve Chairman Ben S. Bernanke yesterday called rising inflation indexes ``unwelcome'' and pledged to make sure they are ``not sustained.''
``You may see another round of slides in metals this week,'' said John Kemp, an analyst at Sempra Metals, one of the 11 companies that trade on the floor of the London Metal Exchange. ``Bernanke's comment was quite hawkish on inflation.''
Copper for delivery in three months fell $250, or 3.2 percent, to $7,510 a metric ton on the LME, the world's biggest metal market. Prices still have more than quadrupled in the past three years, reaching a record $8,800 a ton on May 11.
Zinc fell $130, or 3.6 percent, to $3,460 a ton. Prices have more than doubled in the past year, reaching a record $4,000 on May 11. Nickel declined $500 to $20,950 a ton. Tin dropped $150 to $8,100 a ton and is down 16 percent from a two-year high of $9,602 on May 12.
On the Comex division of the New York Mercantile Exchange, copper futures for July delivery fell 11.15 cents, or 3.1 percent, to $3.4895 a pound. Prices reached a record $4.04 on May 11. A futures contract is an obligation to sell or to buy a commodity at a fixed price for a specific delivery date.
Among 19 commodities in the Reuters Jefferies CRB Index, only gasoline gained today. The index fell 3.93, or 1.1 percent, to 344.85 at 2:08 p.m. New York time. It reached a record 365.45 on May 11.
Higher Rates
Bernanke, in a speech to bankers in Washington, said the U.S. economy ``is entering a period of transition'' and the ``anticipated moderation of economic growth seems now to be under way.''
His remarks reinforced expectations among analysts that Fed policy makers will agree to a 17th consecutive increase in the overnight lending rate at a meeting June 28-29.
``If there is an Achilles heel in the tremendous bull markets we have seen in commodities, it lies in slowing growth,'' Edward Meir, an analyst at Man Financial Ltd. in Darien, Connecticut, said in a report. ``If the Fed continues on its present track, it could very well engineer such a slowdown by year-end.''
Copper has rallied since 2002, partly as the lowest interest rates in more than four decades fueled a housing boom in the U.S., the world's second-biggest user of the metal. Construction accounts for 40 percent of demand, with an average single-family home containing 400 pounds of copper, according to the Copper Development Association.
U.S. Consumption
``Continuing U.S. consumption and a relatively strong U.S. economy is seen as key to the maintenance of demand for goods and as a driver of demand for metals,'' said John Meyer, an analyst at Numis Securities in London.
Lower metal prices led to declines in shares of producers. Phelps Dodge Corp., the world's third-largest copper producer, fell $2.06, or 2.5 percent, to $81.10 in New York Stock Exchange composite trading. Newmont Mining Corp., the world's second-biggest gold producer, dropped $1.03, or 2 percent, to $51.45.
Copper may fall to around $7,245 in London this week, Sempra's Kemp said.
Stockpiles of copper monitored by the LME fell for a fourth straight session, declining 750 tons, or 0.7 percent, to 107,525 tons. Inventories are still equal to less than three days of global consumption.
Supplies
Global supplies of metals such as copper will remain tight because of production cuts, even as investors become concerned over economic growth, said Jim Lennon, an analyst in London at Macquarie Bank Ltd.
Freeport-McMoRan Copper & Gold Inc. yesterday cut its forecast for second-quarter copper output at the Grasberg mine in Indonesia by 16 percent because of the high clay content in some ore.
Grasberg, the world's second-largest copper mine, will produce 235 million pounds in the quarter, less than the 280 million predicted in April, New Orleans-based Freeport said.
``There was a speculative element in the metals markets, and that's coming out,'' Lennon said. ``Fundamentally, we still see very, very strong markets,'' he said.
``I don't think anyone in their right mind'' thinks the metals rally is over, said Marc Morgan, a trader at Triland USA Inc. in New York. Copper may ``just as easily'' rebound to $8,000 as decline to $7,000, he said.
Nickel stockpiles rose for the first time since April 19, gaining 276 tons, or 1.6 percent, to 17,346 tons.
Gold futures for August delivery declined $14, or 2.2 percent, to $634.75 an ounce on the Comex. July silver tumbled 45 cents, or 3.7 percent, to $11.845 an ounce.
