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From a technical standpoint, copper, zinc and lead look attractive.

Base metals weren’t immune to the aggressive selling witnessed in other commodity markets over the past month. The sector plunged in the period, with prices for all of the major metals hitting multi-month lows.

The catalysts for the downturn are by now very familiar to most market watchers: Sovereign debt woes in Europe, as well as broader economic worries related to the U.S. and Europe, were the fuel that pushed prices lower.

While most economists do not foresee a recession in the U.S. or Europe, the probability of one has undoubtedly increased. That puts the burden of demand squarely on the shoulders of emerging markets, particularly China. But even there, growth has slowed.

The country’s manufacturing sector is barely expanding, as measured by the latest Purchasing Managers Index, which fell to 50.2 in July -- the lowest level since February 2009. The dividing line between expansion and contraction is 50.

Meanwhile, consumer prices in China surged by 6.5 percent in the same month, the fastest rate since June 2008, indicating that the central bank’s monetary tightening campaign has yet to tame inflation. Further interest rate hikes are a risk.

On the other hand, industrial production and retail sales in July grew by 14 percent and 17.2 percent year-over-year, respectively. Those are robust growth rates and indicate that the world’s second-largest economy is still on firm footing.

The question now becomes whether base-metals prices have discounted all the various macroeconomic risks that are out there. That, of course, remains to be seen. The evolution of the economic data, particularly in the U.S. and Europe, will be a strong determining factor of where prices go from here.

Given that correlations between many financial assets -- including commodities and stocks -- have been extremely tight over the past month, expect base metals to take their cues from movements in stock markets and other commodity markets.

But in any event, because emerging-market growth remains firm, downside in many of these markets may be limited from here. Many of the metals are standing near technical support levels; thus, now may be a good time for investors to consider taking positions for the long term.

In particular, copper, zinc and lead may be attractive near $8,500 per metric ton, $2,100 per metric ton, and $2,300 per metric ton, respectively.

LME stock data for the month showed a 1.7K metric ton increase in copper inventories, a 168K increase in aluminum inventories, a 13K decrease in zinc inventories, a 11K increase in lead inventories, a 0.9K increase in nickel inventories and a 1.7K increase in tin inventories.

Source: With Technical Support, Base Metals Are a Solid Long-Term Holding