Reuters reported that London copper slipped bruised by the struggles of US lawmakers to find a fix to a looming fiscal cliff and on a rebound in the dollar after it tumbled following the Federal Reserve's extension of loose monetary policy.
As expected, the Fed committed to purchase USD 45 billion in longer term Treasuries a month on top of the USD 40 billion in mortgage backed bonds the US central bank started buying in September.
The dollar dropped after the move, before rebounding on Thursday, which eroded support for metals. A stronger dollar makes commodities more expensive for holders of other currencies.
Mr Thomas Lam chief economist at DMG & Partners Securities said that also, talks aimed at resolving US fiscal problems are proving protracted, pinning back optimism in the country's 2013 growth outlook and paring commodities' year end advance.
He said that "The key thing here is the ongoing fiscal negotiation. Until they have some resolution, I think that is a dampener for the market. Our baseline is expectation for some resolution to the fiscal cliff but there will still be a drag on the economy."
Sharp differences remained on Wednesday between congressional Republicans and the White House in talks to avert the fiscal cliff of steep tax hikes and budget cuts and negotiators warned the showdown could drag on past Christmas.
Three month copper on the London Metal Exchange fell by 0.61% to USD 8,079.25 per tonne by 0337 GMT reversing small gains seen the previous session. Prices have rallied more than 6% since mid November and remain within reach of a near two month high of USD 8,159 hit on Monday. The most traded March copper contract on the Shanghai Futures Exchange slipped by 0.64% to CNY 57,610 per tonne.
The US Federal Reserve, announcing a new round of monetary stimulus, took the unprecedented step on Wednesday of indicating interest rates would remain near zero until unemployment falls to at least 6.5%.
Mr Lam said that the Fed also downgraded its growth projections slightly across the three years to 2015 which clouded the outlook for metals demand.
Fed policymakers see GDP expanding between 2.3% and 3.0% next year. That is down from the 2.5% to 3.0% they forecast in September but is still a bit more optimistic than most private forecasters.
Highlighting the slowdown in industrial metals demand in other regions, euro zone factory output continued its steep fall in autumn this year, underscoring the feeble domestic demand that risks prolonging the bloc's recession.
