Questions about the capacities of U.S. political leaders to successfully negotiate a resolution to the fiscal cliff pulled down copper futures on Monday, according to Reuters.
The possibility of tax increases and spending cuts kicking in once next year begins threatens prospects for growth and development. The base metal is sensitive to world economic and financial developments due to its myriad uses in construction, manufacturing and other industry.
Global market demand is projected to suffer the consequences should U.S. leaders be unable to resolve the fiscal cliff crisis.
"The market is still consolidating in a very narrow range because people are waiting for fundamental signals to kick off; we still haven't seen that. It will probably continue like this until there is an agreement in the U.S. to avoid the fiscal cliff," analyst Andrey Kryuchenkov with VTB Capital told the news source on Monday.
At 11:05 a.m. on Monday, copper futures fell 0.64 percent, a 0.0235-cent loss to $5.6595 per pound.
A glimmer of hope for successful negotiations manifested on Sunday when John Boehner, speaker of the U.S. House of Representatives, showed some flexibility and indicated he would accept an increase in tax rate for Americans whose earnings top $1 million per year.
Growth, development in China, U.S. benefits metal
Economic data released late last week proved to be beneficial to the reddish metal.
The manufacturing sector of China, the globe's top consumer of copper, saw development and growth. Factory activity in the U.S. also widened.
But the analyst said the economic data has to demonstrate a metals fundamentals improvement.
"We have got to see the stock shrinking in China. We have got to see premiums spiking, a narrowing contango at the front end of the curve in London and China, and that will not happen until the start of next year anyway, so the rest of the year will be dominated by fiscal cliff news," the analyst told the news source.
The attention of investors is moving toward manufacturing data to be released by the New York Federal Reserve, which is supposed to happen later on Monday as that data might serve to demonstrate direction regarding the U.S. economy, which is the globe's largest.
Chilean peso suffers
Bloomberg reports the monetary unit of Chile fell after 14 days of gains as the reddish metal lost value.
Copper is Chile's top export and its losses pulled down the peso 0.1 percent after having earlier gained 0.2 percent.
The London Metal Exchange reports the reddish metal's inventories increased the most in more than 48 months.
That developed worries about the likelihood of demand remaining low.
Copper's weekly gains
The Wall Street Journal reports copper futures boosted 0.5 percent last week in the aftermath of strong Chinese manufacturing data and activity.
Industrial production in the U.S. increased anticipations for demand of the reddish metal.
Automobiles, plumbing and power cables are some of the numerous circumstances in which copper is used.
Labor talks proceed
Chile's production of copper is forecast to continue strongly and unlikely to impact production of the metal.
Reductions to the generation of metal in the South American nation are unlikely to minimize production of the reddish metal.
Labor strife is unlikely to occur so generation will remain strong.
Unions in the South American nation have committed to an early wage deal, according to union leaders. That would prevent the onset of a strike as well as disruptions to supplies of the base metal.
Analysts were looking toward the end of the year regarding copper's prospects and are closely watching progression with fiscal cliff negotiations, which threaten to drag the U.S. into a recession.
This material is conveyed as a solicitation for entering into a derivatives transaction.
This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.
Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.
Trade recommendations and profit/loss calculations may not include commissions and fees. Please consult your broker for details based on your trading arrangement and commission setup.
You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.