BS: Copper, gold slide in broad commodities sell-off
COPPER slipped nearly 6 per cent on economic woes while a sell-off in gold was sparked by US dollar gains and a need to raise cash.
Copper futures extended their year-and-a-half lows as worsening sentiment on the global economy painted an increasingly dismal picture of demand for the red metal.
Comex December copper contract fell US16.2c, or 5.8 per cent, to settle at $US2.6275 a pound.
"The whole economic malaise is indicative of declining demand for commodities," said Bill O'Neill, a principal with Logic Advisors. "Copper also is an economic commodity, a reflection of the economy."
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Oil prices also settled below $US94 a barrel in a broad sell-off in the commodities market.
Nearby October gold lost $US41.70 to $US839 an ounce on the Comex division of the New York Mercantile Exchange. Most-active December lost $US43 to $US844.30.
"The dollar is probably the key driver for most of the commodity markets today," said Dave Rinehimer, director of futures perspective at Citigroup Global Markets.
The euro fell to $US1.3748, its weakest level in a year. The move occurred after European Central Bank President Jean-Claude Trichet said inflation risks have diminished, increasing expectations for a cut in interest rates.
A trader linked gold's weakness to commodity-wide selling on worries about a weak economy. Also, he and George Gero, vice president with RBC Capital Markets Global Futures, cited a need by some to raise cash. The metal broke from its recent trend of moving inversely to equities, falling even though the Dow industrials were sharply lower.
"What you have is the need for cash from the prime brokers and the hedge funds," Mr Gero said. "They need the cash for other markets where they are getting margin calls."
Volatility could continue. The monthly non-farm payrolls report is due out tonight (AEST), and its effect on the US dollar can influence gold due to their inverse relationship.
Traders are also watching to see what the House of Representatives does with the modified $US700 billion ($905 billion) financial-rescue plan approved by the Senate.
Patrick Donnelly, broker with Peak Trading Group, said he anticipated a "pretty big bounce" in gold if the House again rejected a bailout plan. "It will be well over $US900, I would expect."
Gold rose sharply on safe-haven buying on Monday when the House voted down a bailout plan, sending the Dow sharply lower. But if the bailout should pass, gold could initially slide further, Mr Donnelly said.
"But then when people realise this bill may not completely help things. ... I expect gold to find a bottom and start going higher again," he added.