Farallon Resources Ltd. (fka FRLIF)

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Zinc falls, Copper Drops as Dollar Climbs, Investors Sell After Rally to 27-Month High
By Anna Stablum - Oct 27, 2010 5:27 AM PT

Copper fell in New York and London as the dollar strengthened and some investors sold the metal after a rally to the highest price in more than 27 months.

Prices reached $3.90 a pound, the highest level since July 7, 2008, in New York before dropping. Copper posted a fifth straight weekly advance in the week ended Oct. 15 as the U.S. Dollar Index, a six-currency gauge of the greenback’s strength, declined for a fifth week. The index rose as much as 0.6 percent today and was last up 0.3 percent.

“Copper followed the currencies initially,” said Randy North, a trader at RBC Capital Markets in New York. “But there appears to be a bit of profit-taking around now.”

December-delivery copper slid 8.75 cents, or 2.3 percent, to $3.7815 a pound at 8:18 a.m. on the Comex in New York. Copper for delivery in three months dropped 2.4 percent to $8,304 a metric ton on the London Metal Exchange. All of the six main metals traded on the LME retreated, led by zinc.

A stronger dollar makes metals priced in the currency more expensive in terms of other monies and stokes demand for commodities as an alternative investment. The U.S. currency’s five-week slide came amid speculation that the Federal Reserve may engage in more debt purchases, or quantitative easing, to revive the U.S. economy. Fed policy makers will meet Nov. 2-3.

Reports today may show increased orders for durable goods and higher sales of new houses in the U.S., the world’s second- largest copper user after China.

House Sales

Bookings for durable goods rose 2 percent in September, the most in five months, according to the median estimate in a Bloomberg News survey of economists. The figures are scheduled for release at 8:30 a.m. New York time. A separate report due 90 minutes later may show that sales of new houses rose last month to a 300,000 annual rate.

Construction accounts for about 25 percent of global demand for copper, according to the Copper Development Association.

“There has been mixed macro data recently, so it provides little guidance as market participants ponder over the size and format of more quantitative easing in the U.S.,” said Andrey Kryuchenkov, an analyst at VTB Capital in London.

In Chile, the world’s largest copper-producing nation, Anglo American Plc and Xstrata Plc’s Collahuasi unit may seek to extend wage talks to avert a strike at the fourth-biggest copper mine. Managers at the unit aim to continue talks into next month if workers reject a pay accord in an Oct. 27 vote, company spokeswoman Bernardita Fernandez said yesterday.

Inventories Swell

LME copper stockpiles rose 0.3 percent to 368,600 tons, exchange figures showed. Orders to draw copper from LME inventories fell 3.4 percent to 27,450 tons.

Zinc and lead for three-month delivery on the LME fell after rising for five days. Prices had gained after Shenzhen Zhongjin Lingnan Nonfemet Co., China’s third-largest zinc producer, suspended output at its biggest smelter of the metals on Oct. 21.

Zinc fell 3.1 percent to $2,535 a ton after sliding as much as 3.3 percent, the most since Oct. 7. Lead declined 1.8 percent to $2,546 a ton, erasing a climb as high as $2,619, the highest price since Jan. 11.

Tin lost 2.2 percent to $26,100 a ton. Prices reached a record $27,338.50 on Oct. 14. The metal has jumped 55 percent this year, leading gains on the LME, after production was disrupted in Indonesia and the Democratic Republic of Congo.

Aluminum slid 1.5 percent to $2,354 a ton. Global demand excluding China will probably expand 17 percent to 24 million tons this year, Norsk Hydro ASA, Europe’s third-largest producer of the lightweight metal, said today. It predicted a 1 million- ton global surplus.

Nickel dropped 1.7 percent to $22,900 a ton.

http://www.bloomberg.com/news/2010-10-27/copper-drops-as-dollar-climbs-before-u-s-durable-goods-housing-reports.html