The Independent – Fears of an unsustainable bubble in commodity prices were fuelled yesterday after key industrial metals such as copper and zinc surged amid thin trading.
The copper price leapt more than 3 per cent in London as traders returning from the Bank Holiday rushed to catch up with a strong increase in New York on Monday.
It jumped by $235, or 3.4 per cent, to $7,235 a tonne compared with Friday’s close. Zinc rose $135, or 4.3 per cent, to $3,310 a ton, within sight of the record of $3,445 hit last month.
The increases were scored against very thin trading in the absence of buying from China and Japan, the major consuming nations that begin week-long holidays this week.
“If the natural buyers go away you would expect the market to come off a bit but it’s not happening – it shows you that it’s a financial market, not a market between physical sellers and physical buyers,” one fund manager said.
The International Wrought Copper Council (IWCC), a trade association for copper users, has written to the Financial Services Authority and the London Metal Exchange (LME) warning about the increasing role of speculators.
Simon Payton, its secretary general, said the price had been driven up by a “feeding frenzy” by hedge funds. “It may be great for the producers but we feel that a market built on speculation leaves tremendous problems for out side of the industry,” he said.
