Farallon Resources Ltd. (fka FRLIF)

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Zinc falls, Copper Drops in New York Following Rally to Highest Price in Three Months
By Anna Stablum - Aug 3, 2010 5:40 AM PDT Tue Aug 03 12:40:27 UTC

Copper fell in New York and London for the first time in five days as some investors sold the metal to lock in gains from a rally to a three-month high.

Prices yesterday climbed to the highest intraday level since April 30 as the Stoxx Europe 600 Index of equities surged to a three-month high, increasing confidence in the global economic recovery. European shares dropped today, and futures indicated that the U.S. Standard & Poor’s 500 Index will slip when trading begins in New York.

“Copper is taking a breather after an impressive rally in the past week as risk sentiment improves,” Andrey Kryuchenkov, an analyst at VTB Capital in London, said in an e-mail today.

Futures for September delivery slid 3.1 cents, or 0.9 percent, to $3.3585 a pound at 8:16 a.m. on the Comex in New York. The contract gained 4 percent last week and yesterday climbed as high as $3.3965. Copper for delivery in three months fell 1.3 percent to $7,410 a metric ton on the London Metal Exchange.

Comex copper’s 14-day relative strength index, a gauge of whether a commodity is overbought or oversold, yesterday rose to 73. Some analysts and investors who study technical charts view an RSI above 70 as a signal that prices may be poised to retreat.

Construction Spending

“We would think that while dips are likely to be bought over the next few days, the recent rally has probably run its course,” Alex Heath, head of industrial-metals trading at RBC Capital Markets in London, said in a report yesterday.

Copper gained yesterday as government figures showed that construction spending unexpectedly increased 0.1 percent in June in the U.S., the world’s second-biggest user of the metal after China. A report today may show an increase in the number of contracts to purchase U.S. previously owned homes.

The index of pending home resales increased 4 percent last month, according to the median forecast in a Bloomberg News survey of 37 economists. The figures are due at 10 a.m. Washington time. Construction accounts for a quarter of copper demand, according to the Copper Development Association.

A separate report scheduled for release at the same time might show that U.S. factory orders decreased 0.5 percent in June, slowing from May’s 1.4 percent drop, according to the survey.

Inventories Expand

Copper stockpiles tracked by the LME rose 0.2 percent to 414,075 tons, daily exchange figures showed. They slid 8.3 percent in July, the most since June 2009, and are down 18 percent this year, on course for the first annual drop since 2004. Aluminum, lead and zinc inventories also increased.

“For all the base metals, apart from tin, we would highlight that a risk to the current strong upward momentum are recent LME inventory trends, which have become less supportive,” Gayle Berry, an analyst at Barclays Capital, said in a report.

Canceled warrants for copper, or bookings to draw metal from stockpiles, rose 0.3 percent to 31,125 tons.

Lead for three-month delivery on the LME rose 0.3 percent to $2,220 a ton. The metal, mostly used to make batteries, pared a climb as high as $2,233, the highest intraday price since April 30.

“The heavy metal often outperforms during the second half of the year, as its peak demand season takes place in the third and fourth quarter as battery producers restock,” RBC’s Heath said.

Aluminum declined 0.5 percent to $2,205.25 a ton. LME inventories rose 0.5 percent to 4.4 million tons after falling for eight days. The contango, cash metal’s discount to the three-month contract, widened to $11.25 a ton after reaching $10 yesterday, the lowest level since March 23, 2007, according to LME data.

Zinc dropped 1.4 percent to $2,091 a ton, nickel fell 1.3 percent to $21,660 a ton and tin slid 0.4 percent to $19,800 a ton.

http://www.bloomberg.com/news/2010-08-03/copper-declines-in-london-following-rally-to-highest-price-in-three-months.html