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VIEW ON PRECIOUS METALS [Copper]

 

13-10-2011

Copper prices bounced back from 14 month low in last 6 trading sessions, mainly helped by a drop in the dollar and signs of restocking in China.

On the London Metal Exchange, copper for delivery in three months currently trading around $7,350 a metric ton (  362 per kg in MCX) and copper has climbed 12 percent from a 14-month low of $6635 on 3rd OCT 11.

Copper futures surged to a two-week high after investor optimism over Europe’s resolve to contain its sovereign debt crisis, But persisting  concerns about the debt crisis in Europe and its implications for economic growth still keep investors cautious. 

 

LME monitored Copper inventories in Asia declined for the 21st session in 22, indicating short term strong demand for copper from the region, particularly China.

Earlier LME copper prices had fallen from around $9800/tonne in August to below $7000 in early October, to the lowest level since August 2010. Copper fell more than 24 percent in September month alone and this trend continues as long as      Euro zone debt crisis unresolved.

According to preliminary ICSG data, global growth in copper demand for 2011 is expected to exceed global growth in copper production, with a production deficit of about 200,000 metric tonnes of refined copper expected for the year.

However, a sustained rise in prices does not appear to be on the cards yet.

 

TECHNICAL OUTLOOK:

Daily Copper chart showing down trend continuing from August peak of $9800 per MT.

Copper found some support in recent days at $6600 (recent low). If this support is breached, it will fall further to $ 6000 level or below. 

For Upside, strong resistance is around $8150, and copper approaches this level only if present up trend continues.

Copper may not sustain current price levels (we consider this is a short term upside rally).

Short term range: $ 6200 to $ 7700

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