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Comex copper slides lower on light profit-taking

NEW YORK: Comex copper futures slumped under light selling pressure, giving back previous gains made during several rally sessions before the end of 1999.

The active March copper traded between 84.50 and 86.20 cents before ending down 1.50 cents at 84.80 cents a lb, its lowest close since December 21 when it settled at 83.30 cents ahead of the Christmas holiday. Spot January drifted lower to close at 83.80 cents a lb, down 1.45 cents.

Most business came from locals with early light fund buying keeping the price decline from free-fall.

Support is now sitting at 83.25 cents in the March contract on a technical basis. "A settlement below that will be pretty bearish," said Scott Meyers, technical analyst with Pioneer Futures.

"I'm not too surprised by the weakness," said a broker. "I think the stock market weakness has gotten the metals markets a little concerned, the Y2K being a non-issue may have some people with stock build-up, and the year ended moving higher on an intra-day basis and we're just seeing some profit-taking," he added.

While market sources were wary of pinning the price action on any one deciding factor, at least one broker suggested that upcoming concerns over an interest rate hike by the U.S. Federal Reserve may be keeping some participants on the sidelines.

"I think that has to be a concern to a degree," he said. If interest rates rise by 25 basis points, for example, the economy will slow a little and that will slow the demand for raw materials, ultimately taking away some demand for copper, he explained.

London trading also started the new year in a downward trend as profit taking took prices lower. The LME three-months copper price ended the afternoon kerb at $1,864 a tonne, down $26 from its December 30 close.

Longer term, the fundamentals remain positive, according to the latest CIBC World Markets report. "After feeling the brunt of the Asian economic fallout and a capacity glut, copper prices began their assent as higher cost production was lifted from the market," said the report.

"We are expecting the market surplus to shrink from 220,000 tonnes this year to 89,000 tonnes in 2000 with copper prices averageing 80.00 cents a lb."

Final estimated volumes on Tuesday reached 11,000 contracts. Estimated final volume for Comex copper on Thursday, its last trading day of 1999, was 6,000 contracts, compared to official final volume Wednesday of 6,418. LME warehouse stocks were up 250 tonnes at 790,225 tonnes in Tuesday's report. Comex inventories on Thursday were unchanged at 91,599 short tons.

The nine-day relative strength index for March copper pulled further away from overbought territory at 48 on Tuesday, compared with Thursday's close of 80.

Technical analysts usually interpret an RSI reading at 70 or higher as indicating overbought conditions and a reading at 30 or lower as oversold. -Reuters