Investing.com - Copper prices extended losses from the previous session on Wednesday to hit a six-year low as some market analysts feared that the rapid decline in the value of China's currency could ignite a currency war that would destabilize the global economy.
Risk-related assets sold-off, with global stocks, emerging market currencies and commodities all under pressure, while safe-haven assets, such as government bonds and gold, saw a boost in demand.
Copper for September delivery on the Comex division of the New York Mercantile Exchange tumbled to a daily low of $2.292 a pound, a level not seen since June 2009, before trading at $2.319 during European morning hours, down 1.2 cents, or 0.52%. A day earlier, copper sank 6.8 cents, or 2.85%, to end at $2.331.
China allowed the yuan to fall sharply on Wednesday, one after devaluing its currency by 2% in a surprise move, as policymakers look to prop up the nation's ailing economy.
The 4% two-day plunge stoked concerns that China may allow the yuan to continue to depreciate, fueling fears over a currency war, as Beijing aims to make the nation's ailing exports more competitive on the global stage.
Copper prices have been under pressure in recent weeks amid growing concerns over the health of China's economy.
Data released Wednesday showed that China's industrial production increased at an annual rate of 6.0% in July, disappointing expectations for a 6.6% gain.
Figures released over the weekend showed that Chinese exports dropped 8.3% in July, their biggest fall in four months, while producer prices fell to a six-year low.
The Asian nation is the world’s largest copper consumer, accounting for almost 40% of world consumption last year.
Elsewhere, gold futures for December delivery tacked on $8.90, or 0.8%, to trade at $1,116.60 a troy ounce after hitting a session peak of $1,119.10, the strongest level since July 20.
Some traders believe that the Federal Reserve could postpone raising interest rates as soon as September in response to China’s currency devaluation move, as Fed officials are likely to remained concerned over global growth and inflation pressures.
Gold fell to a five-and-a-half year low of $1,072.30 on July 24 amid speculation the Fed will raise interest rates in September for the first time since 2006. But prices have since rebounded approximately 3% on hopes of a delayed U.S. rate hike.