Copper Advances as Reports Signal U.S. Rebound Is on Course
Copper prices rose for a third day this week as government reports signaled that the U.S. economy is stronger than housing-sector data had suggested.
Orders for U.S. durable goods rose 0.9 percent in May excluding transportation, the third climb in four months, Commerce Department data showed. The number of Americans seeking jobless benefits fell last week, according to Labor Department figures. Copper has dropped 9.6 percent this year on speculation the global economic recovery was slowing.
“The macroeconomic picture is not as strong as it was in 2009, and the recovery has had some setbacks -- for example, Europe -- but I’m still mildly bullish,” said David Thurtell, an analyst at Citigroup Inc. in London.
Copper futures for September delivery gained 6.95 cents, or 2.4 percent, to $3.024 a pound on the Comex in New York.
The metal also rose on speculation that record-low interest rates will spur inflation and lift demand for commodities as alternative assets, said Michael K. Smith, the president of T&K Futures & Options in Port St. Lucie, Florida.
Federal Reserve policy makers yesterday repeated a pledge to keep the benchmark interest rate near zero percent “for an extended period” and signaled that an increase in borrowing costs may be pushed further into 2011. Copper has more than doubled since Dec. 16, 2008, when the Fed cut the main U.S. rate to as low as zero.
“The Fed is saying they have to keep rates where they are, which means the dollar is going to come down and commodities are going to keep moving up,” Smith said. Copper may reach $3.50 in the next six months, he said.
Housing Slump
Gains may be limited by weakness in the U.S. housing market, Smith said. U.S. new-home sales collapsed by a record 33 percent to an annual pace of 300,000 last month from April, the Commerce Department said yesterday. Builders are the biggest users of the metal, according to the Copper Development Association.
“The move in copper is going to be more about the currencies than the growth situation,” Smith said. “We’ve got a terrible housing market. It’s not supportive. But with what the Fed is doing, copper can still go higher.”
Copper for delivery in three months added $179, or 2.7 percent, to $6,694 a metric ton ($3.04 a pound) on the London Metal Exchange.
Aluminum, nickel, lead, tin and zinc prices also gained.
To contact the reporters on the story: Anna Stablum in London at astablum@bloomberg.net; Millie Munshi in Chicago at mmunshi@bloomberg.net
To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net.
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