Silver, Copper Could Weaken Further If Chinese Economic Data Disappoints; Copper Breaks $3/Lb

New York (Mar 11) Industrial metals markets are keeping an eye on Chinese economic data, particularly after recent data came in much weaker than anticipated and sent markets like silver and copper reeling.

With news such as an 18% drop in February exports, on top of concerns about corporate defaults and tightening credit industrial metals have been hit hard, with copper taking the brunt of the selling. Copper prices are down around 4.8% for the month, and at one point hit their lowest level since July 2010. Silver prices are down around 2.2% on the month and plumbed their lowest levels in a month.

After trading firmer earlier Tuesday, silver and copper are prices lower. At 11:20 a.m. EDT, Comex May silver is down 11 cents at $20.800 an ounce and May copper is down 8.15 cents at $2.9490 a pound.

More Chinese data is slated for release this week, and market participants are bracing for another round of soft results. The losses in copper are also stoking ideas that the metal might be foreshadowing a global economic slowdown, although that view is not universal.

Barclays Barclays economic analysts said several reports are slated for release this week, including industrial production, retail sales and fixed asset investments, among others.

“We expect modest downside risks, which is likely to keep sentiment around China negative,” they said.

Considering copper fell sharply after the last round of poor Chinese data, odds are this could be repeated if the data sets are weak again. That could pull down silver and other industrial metals, too.

Barclay metals analysts said in a visit to Chinese copper market participants last week, sentiment there turned “distinctly bearish since January as imports continued to flood the market while demand has yet to pickup.”

They noted that demand has weakened and supply has jumped. Further, weakening of the yuan has also meant less interest in using copper in financing deals, Barclays metals analysts said. That could mean further downside risks for copper, Barclays said..

Source: FORBES