By Jim Williams
Copper prices rebounded from a new 5.5-year low to close up a tick to start the week, thanks in part to an election in Greece.
The base metal has lost ground recently on sunken oil prices, a stronger dollar, slowed growth, and political instability, to name a few factors. Copper for March delivery, the most actively traded contract, closed up nearly 2% after falling to $2.4190 a pound early Monday, the lowest level since June 2009.
The dollar eased from new 11.5-year highs against the euro on Monday morning as it became clear that the Syriza party is unlikely to abandon the euro after winning Sunday’s election in Greece, despite months of campaigning against the currency. The dollar has risen against major international currencies such as the euro in recent days, following the European Central Bank’s decision last week to launch a program of quantitative easing, and in anticipation of Sunday’s Greek election.
A weaker dollar is good news for copper, which is priced in the U.S. currency and becomes less expensive for foreign buyers when the greenback eases. The euro recently traded at $1.1265, up 0.5%.
“We have fallen a great deal in a short period of time, and funds are acting accordingly,” said Bart Melek, head of commodities strategy at TD Securities.
Can’t Forget About China
Concerns about a slowing economy in China, the world’s biggest copper buyer, have also weighed on the metal, which is used heavily in manufacturing and construction.
Some analysts have suggested support could emerge for copper as China’s State Reserve Bureau (SRB) buys up the metal to keep in reserve, as it often does when prices fall significantly.
At the same time, reports circled that China’s SRB was looking to buy copper on the cheap in a rerun of its actions towards the end of last year, when prices of the metal slid.
“People were expecting to see more stimulus action from China, but without that appearing, we’re in a dead period ahead of the Lunar New Year, so you’re not seeing a great deal of support,” said Nic Brown, head of commodities research at Natixis. “We think that the copper market is probably overshooting on the downside. At some point this is going to be quite an attractive buying opportunity.”
Three-month copper on the London Metal Exchange touched a session low of $5,339.50 a ton, its weakest since July 2009, before paring losses to end at $5,580, up 1.27 percent.
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