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Copper Drops Most in Two Months on Bets China to Cool Economy

Jan. 20 (Bloomberg) -- Copper fell the most in two months on concern that China, the world’s biggest metal consumer, will take more steps to restrain the economy.

China’s economic expansion accelerated by 9.8 percent in the fourth quarter compared with 9.6 percent in the previous quarter. In 2010, consumer prices rose 3.3 percent topping a government target of 3 percent. Last week, the government told banks to set aside more deposits as reserves for the fourth time in two months.

“The market is worried that China is going to tighten again,” said Rich Ilczyszyn, a senior strategist at Lind-Waldock, a broker in Chicago. “Copper is going to have a hard time bouncing back based on outside-market influence.”

Copper futures for March delivery fell 9.8 cents, or 2.2 percent, to close at $4.272 a pound at 1:32 p.m. on the Comex in New York, the largest decline for a most-active contract since Nov. 16. The price has gained 27 percent in the past 12 months.

The metal may fall to $4 in two weeks should equities drop, Ilczyszyn said. The Standard & Poor’s 500 Index is heading for a weekly decline.

The inflation rate in China may peak at as much as 6 percent in the first half, according to Citigroup Inc. and Credit Suisse Group AG.

China’s metal supply is adequate, and a “price spike” is unlikely before the Lunar New Year, Goldman Sachs Group Inc. said in a report on Jan. 17. The week-long holiday begins Feb. 2.

“China is buying very little,” said Andrew Silver, a trader at Natixis Commodity Markets Ltd. in London.

Copper for delivery in three months slid $220, or 2.3 percent, to $9,355 a metric ton ($4.24 a pound) on the London Metal Exchange. Yesterday, the metal reached a record $9,781.

Aluminum, lead and zinc prices also dropped in London. Nickel and tin gained.

To contact the reporters on this story: Yi Tian in New York at Ytian8@bloomberg.net; Maria Kolesnikova in Moscow at mkolesnikova@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net

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