Forexpros – Copper futures tumbled for a second day on Tuesday, as prices came under pressure after data pointed to a slowdown in Chinese manufacturing activity and amid fresh concerns over the debt crisis in the euro zone.
On the Comex division of the New York Mercantile Exchange, copper futures for December delivery traded at USD3.501 a pound during European morning trade, plunging 3.61%.
It earlier fell by as much as 3.95% to trade at USD3.486 a pound, the lowest price since October 26.
Market sentiment was weighed after Greek Prime Minister George Papandreou reportedly said that a referendum will be held on the latest aid proposals for the debt-laden country, adding to nervousness over the region’s debt crisis.
If the Greek people use the referendum to reject the latest EU bailout deal it would put the next tranche of aid to Greece in jeopardy, moving the country towards the brink of default.
Meanwhile, official data released earlier showed that China’s official purchasing managers’ index for October fell to the lowest level since February 2009, declining to 50.4 from 51.2. A reading above 50.0 indicates growing activity.
China is the world’s largest copper consumer, accounting for almost 40% of world consumption last year.
The downbeat global economic growth outlook prompted investors to shun riskier assets, such as stocks and commodities and flock to traditional safe haven assets like the U.S. dollar.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, rallied for a second day, climbing 1.04% to trade at a seven-day high of 77.44.
A stronger dollar reduces demand for raw materials as an alternative investment and makes dollar-priced commodities more expensive for holders of other currencies.
Copper prices fell 2% on Monday as the U.S. dollar rallied against its major counterparts after Japan intervened to weaken the yen, while lingering concerns over the debt crisis in the euro zone also weighed.
Elsewhere on the Comex, gold for December delivery dropped 1.18% to trade at USD1,704.85 a troy ounce, while silver for December delivery tumbled 2.53% to trade at USD33.48 a troy ounce.
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