Copper Falls Most in a Week as Dollar Gains, Optimism Fades

LONDON, July 1 -- Copper prices fell the most in a week after the dollar rallied and a report showed a decline in U.S. consumer confidence, curbing optimism that the worst of the recession is over.

    The U.S. Dollar Index, a six-currency gauge, rose as much as 0.6 percent. Most commodities, traded in dollars, move in the opposite direction of the greenback as investors use the contracts to hedge against inflation. U.S. consumer confidence unexpectedly fell this month.

    "A lot of people think that the dollar can go even higher now, and that happening when fundamentals are still weak leaves copper vulnerable," said Matthew Zeman, a LaSalle Futures Group trader in Chicago. "I wouldn't be surprised to see a pretty hefty correction in copper."

    Copper futures for September delivery slid 5.4 cents, or 2.3 percent, to $2.272 a pound on the New York Mercantile Exchange's Comex division. That marks the steepest decline for a most-active contact since June 22. The price gained 3.4 percent in June and 23 percent in the second quarter.

    The Conference Board said its confidence gauge decreased to 49.3 in June from 54.8 in May. Economists forecast a rise to 55.3, according to the median of 70 estimates in a Bloomberg News survey.

    Copper 'Fully Priced'

    "From a fundamental point of view, copper is fully priced during this stage of the economic cycle," said Neil Buxton, managing director at London-based GFMS Metals Consulting Ltd.

    Copper has jumped 61 percent this year on optimism about the economic outlook. The metal has also gained as imports rose in China, the world's biggest copper user.

    "Copper has had a big run-up this year on some demand expectations that may have gotten a little ahead of where the economy is," Zeman of LaSalle said. "It's pretty vulnerable now to a correction."

    On the London Metal Exchange, copper for delivery in three months declined $132, or 2.6 percent, to $4,967 a metric ton ($2.25 a pound).

    Aluminum was down 0.6 percent to $1,630 a ton. Lead fell 0.8 percent to $1,690. Zinc slipped 0.7 percent to $1,549. Tin declined 3.1 percent to $14,150. Nickel dropped 2.7 percent to $15,375.

    (Source: Bloomberg)