Forexpros – Copper futures erased gains on Wednesday, slumping to a six-day low as fears over Italy’s debt woes intensified after Italian bond yields soared above the critical 7% level.
On the Comex division of the New York Mercantile Exchange, copper futures for December delivery traded at USD3.478 a pound during European morning trade, tumbling 1.57%.
It earlier fell by as much as 1.75% to trade at USD3.471 a pound, the lowest price since November 1.
The 10-year Italian government bond yield soared to a euro-lifetime high of 7.09% earlier, a level widely viewed as unsustainable in the long-term. The surge in yields came after clearing house LCH.Clearnet raised margins investors must provide to trade Italian debt.
The news fuelled concerns that the euro zone’s sovereign debt crisis will spill over to Italy after smaller euro zone nations Greece, Ireland and Portugal had to seek international bailouts once their borrowing costs rose above the key 7%-mark.
Italy’s EUR1.9 trillion debt is bigger than that of Greece, Spain, Portugal and Ireland combined.
Embattled Prime Minister Silvio Berlusconi said late Tuesday that he would resign after parliament approves next year’s budget. The announcement came after Berlusconi lost his parliamentary majority during a vote on a budget bill.
The news 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 0.99% to trade at 77.55.
Copper prices moved higher during the Asian trading session after official data showed that China’s consumer price index eased for the third consecutive month in October, slowing to 5.5% from 6.1% in September.
The data suggested Beijing had room to ease monetary policy in the near-term and spur demand for the red metal. China is the world’s largest copper user, accounting for nearly 40% of world consumption last year.
Elsewhere on the Comex, gold for December delivery fell 0.75% to trade at USD1,785.55 a troy ounce, while silver for December delivery dropped 1.25% to trade at USD34.71 a troy ounce.
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