Copper futures plunged to the lowest level since September 2010 on Thursday, as the Federal Reserve’s grim outlook for the U.S. economy and downbeat Chinese manufacturing data raised concerns over a slowdown in global demand.
On the Comex division of the New York Mercantile Exchange, copper futures for December delivery traded at USD3.568 a pound during European morning trade, tumbling 3.45%.
It earlier fell as much as 3.89% to trade at USD3.553 a pound, the lowest price since September 22, 2010.
Copper prices have lost nearly 22% since hitting a record high of USD4.549 on February 13, more than the 20% drop that is viewed as signaling a bear market.
In a highly anticipated move Wednesday, the Fed said it would buy USD400 billion worth of long-term Treasury bonds by June 2012, while selling an equal amount of short-term debt over the same period, in a move known as ‘Operation Twist’.
However, the Fed warned of “significant downside risks to the economic outlook, including strains in global financial markets.”
Copper prices came under further pressure after a preliminary reading of the HSBC China purchasing managers' index fell to a two-month low of 49.4 in September, remaining in contraction territory for the third consecutive month.
Data showing that German manufacturing output fell to a 24-month low in September, while manufacturing activity in the euro zone slumped to the lowest since August 2009 also weighed.
The dire global outlook prompted investors to shun riskier assets, such as stocks and commodities and flock to traditional safe haven assets like the greenback.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.71% to trade at a seven-month high of 78.97.
A stronger dollar saps demand for raw materials as an alternative investment and makes dollar-priced commodities more expensive for holders of other currencies.
Elsewhere on the Comex, gold for October delivery dropped 2.62% to trade at USD1,758.45 a troy ounce, while silver for December delivery plunged 4.45% to trade at USD38.66 a troy ounce.
