Industrial metals plunged and gold rallied as the emergence of a fast-spreading and highly mutated SARS-CoV-2 strain sparked a sell-off across financial markets.
Base metals, including copper and aluminum, fell more than 3 percent in London as investors weighed the risk that the new variant identified in South Africa might spur fresh outbreaks and derail growth in the world’s leading industrial economies.
Scientists say it carries a high number of mutations that could make it more effective at evading existing vaccines.
The new strain creates fresh risks to the outlook for metals demand, imperiling a recent rebound in prices driven by chronic supply constraints that have led to sharp drawdowns in global inventories.
Gold pared recent losses as investors across financial markets questioned whether new outbreaks could complicate central banks’ efforts to withdraw ultra-loose monetary policies.
On Friday, traders rushed to cut back their bets on rate hikes, while safe-haven currencies rallied.
“Metals prices had been picking up on the back of the focus on fundamental physical tightness,” Amalgamated Metal Trading head of research Tom Mulqueen said by telephone. “Now this new virus variant has emerged and the market is in a flight to safety.”
Copper fell as much as 3.5 percent to US$9,459 a ton and traded at US$9,467.50 on the London Metal Exchange, as all base metals traded lower.
Spot gold rose 1.2 percent to US$1,809.55 an ounce, while silver traded little changed, and platinum and palladium declined.
Gold for December delivery on Friday rose US$1.20 to US$1,785.50 an ounce, down 3.6 percent weekly.
“Uncertainty about the possible consequences of the new virus variant clearly reminds the markets that this pandemic is not over yet,” Alexander Zumpfe, a senior trader at refiner Heraeus Metals Germany GmbH & Co, said in a note. “The gold price should remain supported in this environment and the topic of tapering should take a back seat for the time being.”
Iron ore futures also plunged more than 6 percent in Singapore, paring a weekly gain as caution crept back into the market.
Aside from the risk posed by the new variant, there are other, ongoing ones in China’s property sector, while local governments have struggled to find good projects to spend their money on.
Additional reporting by AP
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