Forexpros – Copper futures declined on Monday, trading close to a three-week low as ongoing fears over mass euro zone credit rating cuts dampened sentiment on the industrial metal, while a stronger U.S. dollar also weighed.
On the Comex division of the New York Mercantile Exchange, copper futures for March delivery traded at USD3.311 a pound during European morning trade, dropping 0.6%.
It earlier fell by as much as 1.1% to trade at USD3.262 a pound, the lowest since December 15, when prices fell to a three-week low of USD3.233 a pound.
Concerns over mass credit rating downgrades across the euro zone lingered after Fitch Ratings put six euro zone nations, including France, Spain and Italy on watch for downgrades on Friday, saying a “comprehensive solution” to the region’s debt crisis was “technically and politically beyond reach.”
Also Friday, Moody’s Investors Service downgraded Belgium by two notches to Aa3, citing “increasing risks due to deteriorating market funding conditions”.
Furthermore, European Central Bank President Mario Draghi told the Financial Times over the weekend he was sticking with his opposition to intervening in the bond markets and buying up sovereign debt in order to ease the region’s ongoing debt crisis.
Meanwhile, investors eyed a conference call of euro zone finance ministers later in the day about the draft text of a new fiscal plan agreed earlier this month. Talks were also to include the size of individual loans to the International Monetary Fund.
Europe as a region is second after China in global demand for the industrial metal and worries over its economic growth have kept copper prices under pressure in recent weeks.
Copper prices came under further pressure as the dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, gained 0.15% to trade at 80.82.
A stronger dollar reduces demand for raw materials as an alternative investment and makes dollar-priced commodities more expensive for holders of other currencies.
Demand for the greenback was boosted after reports emerged that long-time North Korean leader Kim Jong il died, fuelling concerns over potential geopolitical instability across the region.
Elsewhere on the Comex, gold for February delivery eased down 0.1% to trade at USD1,596.05 a troy ounce, while silver for March delivery tumbled 1.95% to trade at USD29.08 a troy ounce.
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