Copper futures reach record high
Asarco strike cited as factor; gold prices top $450
By Myra P. Saefong, MarketWatch
Last Update: 1:36 PM ET Aug. 16, 2005
SAN FRANCISCO (MarketWatch) -- Copper prices climbed to their highest price ever recorded on the futures market Tuesday as a labor strike at Phoenix-based mining company Asarco continued to feed concerns over supplies.
At the same time, growing demand for gold lifted prices for the yellow metal back above $450 an ounce.
"Copper, a trend follower's dream, just keeps on making new contract highs," said Dale Doelling, chief market technician at Trends In Commodities.
"This market won't be satisfied until it finally cracks $2," he said, adding: "I'm certainly not going to bet against that happening."
Copper for September delivery climbed as high as $1.738 a pound on the New York Mercantile Exchange. The contract last changed hands at $1.719, up 1.15 cents, or 0.7%.
"With the Asarco strike ongoing the market may well be driven higher, but copper still looks increasingly vulnerable in the short term because of the dominant fund position," said William Adams, an analyst at BaseMetals.com.
In an Aug. 10 press release, the United Steelworkers of America accused Grupo Mexico of purposely bankrupting its copper unit Asarco and blamed the parent company for provoking and prolonging the strike called by about 1,5000 steelworkers against Asarco's operations in Arizona and Texas.
Against this backdrop, "fundamentals for copper are currently tight, [but] with hefty profits on the table, the funds may not want to run the risk of waiting for physical buyers to return to the market," Adams explained.
"Also as the metals form part of many funds' commodity baskets, any selloff -- in, say, oil -- could also trigger selling across all the commodity components in the baskets," he said.
Gold back atop $450
At the same time, gold futures topped the $450-an-ounce level again, all but erasing Monday's weakness and finding support from higher demand and strength in oil prices.
"Gold is benefiting from a dramatically improved technical picture," said Brien Lundin, editor of Gold Newsletter.
"In addition, windfall oil profits have apparently boosted physical gold demand from the Middle East, and the onset of the buying season in India is making demand from this region an increasingly important factor," he said.
Generally, "the trend is up for gold, and trend-following traders are hoping onto a bandwagon that should travel a good bit further," he said.
Doelling pointed out that December gold fell to a low of $445.70 overnight -- nearly a $10 decline from the intraday day high of $455.30 touched on Aug. 12.
"The commodity funds holding long positions are starting to get nervous and, if the market closes below $445, they'll exit the market, flooding the trading floor with sell orders," he said.
If that happens, prices "would likely push down to major support at $436," Doelling said.
At last check, December gold traded at $450.80 an ounce, up $3.20, or 0.7%, after having lost nearly $4 on Monday.
Rounding out the Nymex action, silver for September delivery traded at $7.035 an ounce, up 7 cents, while October platinum fell $12.20 to $893 an ounce and September palladium traded at $187 an ounce, up 75 cents.
Tracking inventories, copper supplies were down 302 short tons at 8,085 short tons as of late Monday, according to Nymex. Silver stocks were up 152,682 troy ounces at 111.2 million troy ounces, while gold inventories stood at 5.90 million troy ounces, down 482 troy ounces from the previous session.
Stock indexes gain
In equities, the strength in gold and copper helped lift key indexes for the sector higher.
Tracking the sector as a whole, the Philadelphia Gold/Silver Index (XAU: news, chart, profile) stood at 99.18 points, up 0.1%.
The Amex Gold Bugs Index (HUI: news, chart, profile) climbed to 216.37, and the CBOE Gold Index (GOX: news, chart, profile) reached 89.48, with each posting gains of 0.3%..
Individual issues on the rise included Meridian Gold (MDG: news, chart, profile) , Anglogold Ashanti (AU: news, chart, profile) and Kinross Gold (KGC: news, chart, profile) .
Myra P. Saefong is a reporter for MarketWatch in San Francisco.
