Metals across the board have suffered steep losses in recent days, with gold’s alarming 9% one-day drop rattling the markets and investor confidence. And while gold remains as one of traders’ top concerns, another metal’s volatile movements has been raising some red flags. Yesterday, copper futures for April delivery tumbled 3.6% to $3.1880 a pound, marking the lowest level since October 2011. The metal has almost dropped 20% from its most recent high, so the probability of copper entering bear territory is quite likely [for more copper news and analysis subscribe to our free newsletter].
Copper falling below key support levels is of great concern to investors, as this metal is often considered a barometer for the global economy. And though yesterday’s decline was sparked by the IMF’s downgrade of global growth projections, weakness in other corners of the market has led many to scale back demand outlooks for the metal.
This week, disappointing Chinese data sent copper into a tailspin, as the behemoth economy and the world’s largest consumer of copper reported GDP figures that missed the mark; economic growth in the first quarter came in at 7.7%, while analysts were expecting GDP growth to be 8%. Adding to concerns, Moody’s also changed its outlook for China from positive to stable [see When Goldman Sachs Says Short Gold, It's Time To Buy].
Economic reports from the eurozone this week also put downward pressure on copper prices. New car registrations in the EU fell for the 18th straight month in March, logging in a 10.2% drop from a year earlier.
Perhaps the only good signs for the metal this week were Wednesday’s reports that showed U.S. construction of new homes jumping to the highest level since the financial crisis, and industrial production rising more than expected. Next week, copper traders should pay close attention to U.S. new home sales, which are slated to be reported on Tuesday.
Year-to-date, copper prices have fallen roughly 10%:
Disclosure: No positions at time of writing.