Copper Prices Fall on Concern 2009 Rally Went Too Fast, Too Far

NEW YORK, Aug. 11 -- Copper prices fell as a slide in equity markets fueled concern that the metal's rally to a 10- month high may have been exaggerated.

    The Standard & Poor's 500 Index dropped as much as 0.9 percent, halting four straight weeks of gains and renewing concern that the economic recovery may stall. Metal prices are looking "frothy" after surging this year, and investors should reduce their holdings, according to Goldman Sachs JBWere Pty.

    "We have yet to see conclusive proof that the tide has turned and that growth, outside of China, is back on the cards," Alex Heath, RBC Capital Markets' head of industrial- metals trading in London, said in a report.

    Copper futures for September delivery fell 1.5 cents, or 0.5 percent, to $2.7705 a pound on the Comex division of the New York Mercantile Exchange. Earlier, the metal touched $2.8465, the highest price for a most-active contract since Oct. 1.

    In June, Japanese machinery orders rose 9.7 percent from May, the first advance in four months, while in France, industrial production climbed more than expected. Goldman Sachs Group Inc. raised its forecast for China's economic growth this year. Copper prices have almost doubled in 2009 on speculation that the worst of the global recession has passed.

    "You've got a lot of people thinking that demand will continue to climb, especially from China, as the global economy starts growing," said Frank McGhee, Integrated Brokerage Services LLC's head dealer in Chicago.

    Declines in global demand, excluding China, threaten the rally, according to Goldman Sachs JBWere.

    "Base-metals prices have run further and faster than we believe to be justifiable, either on current fundamentals or on the short-term outlook," Goldman Sachs JBWere said.

    On the London Metal Exchange, copper for delivery in three months fell $15, or 0.2 percent, to $6,135 a metric ton ($2.78 a pound). Lead, tin, zinc and aluminum also dropped in London. Nickel gained.

    (Source: Bloomberg)