Copper opens lower on risk aversion sentiment

The price of copper fell on Friday, affected by profit taking and risk-off sentiment in financial markets in general, due to concerns about accelerating inflation.

Benchmark copper on the London Metal Exchange (LME) was down 2.3% at $10,020 a tonne at 11:20 GMT after three days of gains that pushed the price to its highest in nearly four months.

World stocks fell after US consumer prices posted the biggest annual rise in 40 years, which is expected to prompt tighter monetary policy by the Federal Reserve.

“Risk sentiment in the financial markets today is really negative and the dollar rose after yesterday’s CPI. There is also likely to be some profit taking after the rally we have seen.”said Julius Baer analyst Carsten Menke.

“As for the big picture, there is a general cooling of the economy in China. Infrastructure and the real estate sector are key to driving demand for metals and we do not expect a rapid change in trend in any of them”he added.

Menke expects LME copper to drop to $9,500 a tonne in three months and to $8,750 in 12 months.

On a weekly basis, however, base metals advanced, led by aluminum, which was supported earlier in the week by smelter closures in China and Europe and low inventories at stock exchange warehouses.

The dollar index hit an eight-day high, making greenback-denominated metals more expensive for holders of other currencies.

In other base metals, aluminum on the LME fell 1.6% to US$3,199.50 a tonne, after hitting its highest level in more than 13 years the day before; zinc fell 0.6% to US$3,681; nickel lost 0.7% to US$23,355; lead was down 0.2% at $2,275.50; and tin fell 0.7% to $43,895.