Copper futures fall to 2-week low in risk-off trade

Copper futures were down for a second day on Tuesday, as market sentiment remained cautious ahead of U.S. President Barack Obama’s State of the Union speech later in the day and the upcoming meeting of the G20 group. Activity was subdued with market participants in China away for the Lunar New Year holiday. China is the world’s largest copper consumer, accounting for almost 40% of world consumption last year. On the Comex division of the New York Mercantile Exchange, copper futures for March delivery traded at USD3.713 a pound during European morning trade, down 0.25% on the day. New York-traded copper prices fell by as much as 0.5% earlier in the day to hit a session low of USD3.710 a pound, the weakest level since January 30. A stronger U.S. dollar pressured copper prices, with the dollar index up 0.2% to trade at 80.56, the highest level since January 10. A stronger dollar reduces demand for raw materials as an alternative investment and makes dollar-priced commodities more expensive for holders of other currencies. Copper traders were now awaiting President Obama's State of the Union speech later Tuesday for any indications of an agreement to avert automatic tax hikes and spending cuts due to take effect on March 1. Investors were also cautious ahead of a meeting of Group-of-20 finance ministers in Moscow later in the week, which was likely to feature discussions on competitive currency devaluation. Meanwhile, market players continued to monitor political developments in the euro zone, amid uncertainty ahead of upcoming elections in Italy and renewed political tensions in Spain where the government has become embroiled in a corruption scandal. Spain’s Treasury sold EUR3.02 billion worth of 12-month government bonds at an average yield of 1.548% earlier in the day, up from 1.472% at a similar auction last month. Elsewhere on the Comex, gold for April delivery dipped 0.3% to trade at USD1,643.85 a troy ounce, while silver for March delivery fell 0.7% to trade at USD30.69 a troy ounce.

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