Renewed Risk Aversion Hurts Copper Prices


". . .the Chinese might be more intent on using their internal stockpiles."

Copper fell to a three-week low Monday, as investors steered clear of 'high-risk' assets after U.S. regulators charged Goldman Sachs with fraud, and as the dollar rose.

The SEC on Friday charged Goldman Sachs with fraud over its marketing of a debt product tied to subprime mortgages that was designed to fail.

Commodity and equity markets extended losses Monday after falling across the board on Friday.

Three-month copper on the LME CMCU3 slid to $7,657 a ton at 0929 GMT from $7,763 Friday.

The metal used extensively in power and construction touched a session low of $7,610.25, its weakest since March 29 and adding to a 2.3% loss Friday.

"They are big in the commodity markets, that's why people would be unnerved," Charles Kernot, an analyst at Evolution Securities, said of Goldman Sachs.

Also weighing on sentiment were efforts by China, the world's top consumer of base metals, to rein in speculation in its red-hot property market.

Chinese buying has been a crucial support to industrial metals markets in a downturn that has crippled global demand, and its stockpiling helped copper surge 140% in 2009.

China last week raised mortgage rates and down payment requirements to control speculative property buying, a move seen slowing construction investment and consequently demand from base metals like copper.

"Chinese buying of metal is very important, without that the supply demand balances will shift negatively," Kernot said.

"There might be a natural slowdown," he said of Chinese buying.

"With metals prices where they are, the Chinese might be more intent on using their internal stockpiles rather than buying more on the international market."

Signaling a potential improvement in demand, however, stocks of copper at LME warehouses have declined in recent weeks. Stocks last fell 1,525 tons to 507,875.

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