Copper hit its lowest in almost a month on Thursday, pressured by a deadlock in talks to avert a fiscal crisis and by weak job data in the United States, but an upward revision of the country's growth data limited the fall.
In Washington a political deal to narrow the budget deficit is needed to avoid a package of mandatory spending cuts and tax rises set for January, which could throw the world's largest economy back into recession.
No progress was made in talks on Wednesday.
“In the past few days there were hopes that the politicians would find a solution to the dispute, but overnight the talks seem to have deteriorated,” Commerzbank analyst Daniel Briesemann said.
“So it looks like they won't resolve the issue before the end of the year, and that's probably weighing on more cyclical commodities today.”
The tension was expected to rise later on Thursday when the Republican Party leadership plans to try to pass a bill of its own in Congress in a move that has already angered President Barack Obama.
Three-month copper on the London Metal Exchange was at $7,753 by 17:00 SA time, down from $7,926 at the close on Wednesday.
It sank to its lowest since Nov. 28 at $7,735 earlier in the session, shortly after data from the United States suggested job growth remains moderate in the world's largest economy, clouding the outlook for base metals demand.
“The jobless claims data was negative, that's a key factor for copper today, plus there are nerves over the fiscal cliff,” VTB Capital analyst Andrey Kryuchenkov said.
The metal, used in power and construction, was also under pressure from traders who rely on reading signals from price charts after it fell below the $8,000 mark.
Copper has dipped below its 30-, 100- and 200-day moving averages, which have converged around $7,877/$7,878.
An upward revision of US GDP data for the third quarter countered some of the doubts over the weakness of the US economy but was not convincing enough to lift copper prices.
Gross domestic product expanded at a 3.1 percent annual rate in the third quarter, the Commerce Department said in its third estimate on Thursday, up from the 2.7 percent pace reported last month.
“Sure the GDP number being better holds up some promises of upsides in the US economy but only once the fiscal cliff negotiations are resolved and that could be today, tomorrow, who knows,” Robin Bhar, an analyst at Societe Generale, said.
US housing starts data had already fuelled some concerns about the recovery on Wednesday. Construction is a significant market for copper, with a little over 400 lb of the metal used to build a typical US home.
Helping to limit losses in copper, China's manufacturing sector expanded in December, data showed this month. This has been reflected in some copper purchases by consumers.
China is the world's top copper consumer, accounting for 40 percent of refined demand last year.
“From late November to early December, downstream users in China built up stocks. Demand now is okay, but not very strong,” said Chunlan Li, a Beijing-based copper analyst with consultancy CRU.
In other metals, three-month aluminium, was at $2,063 per tonne from $2,085 at the close on Wednesday.
Daily average primary aluminium output rose slightly last month to 67,600 tonnes from 67,200 in October, International Aluminium Institute data showed on Thursday.
Three-month tin, was at $23,200 from $23,500, and lead was at $2,316 f rom $2,337.
Zinc was $2,055 from $2,086 and nickel was $17,442 from $17,750. - Reuters