Copper continued to lose ground amid the broader sell-off in commodities markets, falling more than 6 per cent below the $7,000 level for the first time in 15 months.
Investors in Europe took the cue from Shanghai, as continued pessimism over a possible resolution for the sovereign debt crisis prompted short selling. Copper for three-month delivery on the London Metal Exchange fell to $6,800 a tonne, but recovered the support level of $7,000, and was trading at $7,135, down 2.1 per cent, in European mid-morning trading.
New data from the London Metal Exchange suggested that the sharp fall in prices last week was caused by a high number of new short selling at the end of last week rather than the liquidation of long positions, said Leon Westgate, commodities strategist, at Standard Bank.
More volatility in copper prices is expected this week as margin requirements are scheduled to be tightened on September 29, and the Chinese celebrate National Day on October 1. In Europe, positions are expected to be squared ahead of the annual LME week, when metals traders, banks and mining groups gather in London, which starts on October 3.
Mr Westgate said the potential for short covering activity and a sudden wave of buying later in the week was high. “We are going to have a very choppy couple of days,” he said.
Other base metals were also weaker, with aluminium for three-month delivery down 0.3 per cent at $2,199 a tonne on the LME, although tin, which at one point fell as much as 27 per cent last week, rose 4 per cent to $20,100.
Resource stocks recovered some of their ground after falling sharply in earlier trading, leading the fall in the FTSE 100. BHP Billiton was down 0.4 per cent at £17.54, Rio Tinto declined 1 per cent to £29.56 while Glencore, the trader, fell 1.2 per cent to 407.5p. Antofagasta, which led the FTSE falls earlier in the session, was trading down 0.6 per cent at 965p.
Gold saw a sharp sell-off in early trading, breaking through the $1,600 level to 1.534.49. At those levels, however, the yellow metal saw active support, and was trading down 2.6 per cent at $1,613.60 a troy ounce.
Crude oil was also hit with November ICE Brent down 19 cents to $103.75 and the November Nymex West Texas Intermediate retreating 75 cents to $79.05.
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