Copper extends decline from record high as investors shift to risk-off positioning

Copper continued to pull back on Monday for a second straight session as investors moved into risk-off mode after Kevin Warsh’s nomination as the next Fed chair, while demand was also subdued in the run up to China’s Lunar New Year break.

The most-active copper contract on the Shanghai Futures Exchange slumped 7.60% to 100,110 yuan ($14,401.00) a metric ton as of 0330 GMT.

The benchmark three-month copper on the London Metal Exchange dropped 2.73% to $12,798 a ton.

Copper is taking hits after it set record highs on both exchanges on Thursday, touching 114,160 yuan in Shanghai and $14,527.50 in London, supported by a speculative buying spree.

The decline is part of a broader sell-off in metals led by gold and silver as investors unwind a record-setting speculative rally after US President Donald Trump on Friday nominated Kevin Warsh as the next Chair of the Federal Reserve, a former Fed governor seen as less likely to press for aggressive rate cuts.

The US dollar has steadied, consolidating gains after strengthening following Warsh’s appointment.

A higher dollar weakens commodities priced in the greenback, as they become less affordable for investors using other currencies.

Alongside other industrial metals, copper also came under pressure as demand prospects weaken in the run up to the Lunar New Year holiday starting February 15 in top consumer market China.

The Yangshan copper premium, a gauge of Chinese consumer’s appetite for imported materials, rose to $27 a ton after a decline in copper prices, but is still low compared with above $40 entering January.

Among other base metals, tin led the selloff, with the most-traded contract in Shanghai hitting its limit down to decline by 11% to 392,650 yuan a ton.

Benchmark London tin pulled back 6.93% to $48,355 a ton.

Tin’s drop is squeezing out earlier bubbles, traders said. Elsewhere on SHFE, aluminium tumbled 6.64%, zinc declined 5.64%, lead dropped 1.61%, nickel plunged 8.09%.

Among other LME metals, aluminium dropped 2.40%, zinc was down 2.88%, lead dipped 1.72%, and nickel lost 3.92%.