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Copper prices falter on demand doubts, profit taking

Kitco News

* Premium for cash over 3-month copper at $13.8 a tonne
* Copper stocks in LME registered warehouses at 13-year lows

LONDON, Aug 20 (Reuters) - Copper prices fell on Thursday as Federal Reserve policymakers voicing concern about U.S. growth triggered profit taking, reinforced by doubts about whether a recent rally was justified by fundamentals.

Bemchmark copper on the London Metal Exchange was down 1.6% at $6,575 a tonne at 1001 GMT.

Prices of the metal used widely in the power and construction industries touched $6,707 on Wednesday, the highest since June 2018 and a gain of more than 50% since March when economic activity stalled due to COVID-19 lockdowns.

"We've had a significant rally and we need to see if the fundamentals catch up with prices," said Dan Smith, managing director at Commodity Market analytics. "China is clearly quite strong, the problem would be weakness in the rest of the world."

SPREADS: Copper stocks in LME registered warehouses at 13-year lows of 104,425 tonnes and cancelled warrants - metal earmarked for delivery - at 50% of the total have fuelled worries about supplies on the LME market. This is why the cash copper contract has mostly traded at a premium over the three-month contract since early July. It ended at $13.80 a tonne on Wednesday.

FED: Several Fed policymakers said monetary policy may have to be eased further to help nurse the economy through the coronavirus pandemic, minutes from the policy meeting last month showed.

DOLLAR: Also weighing on base metal was the higher U.S. currency, which when it rises makes dollar-denominated commodities more expensive for holders of other currencies, which could subdue demand.

PMIS: For industrial metals markets clues to future demand will come from surveys of purchasing managers at manufacturing firms around the world, specifically their order books.

CHINA: Chinese data will come under particular scrutiny as China accounts for around half of global consumption of industrial metals.

OTHER METALS: Aluminium was down 0.1% at $1,791 a tonne, Zinc fell 1.1% to $2,478, lead slipped 2% to $1,972, tin ceded 0.9% to $17,480 and nickel lost 0.2% to $14,695.

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