Copper Prices Climb to One-Week High as Weakening Dollar Spurs Demand
Copper climbed to the highest price in a week after a drop in the dollar boosted demand from buyers seeking alternative assets.
The greenback fell for a second day, losing as much as 0.6 percent against a basket of six currencies. Copper prices also gained today as inventories monitored by the London Metal Exchange sank to the lowest level since Nov. 13. The metal has lost 6.3 percent since April 1 on signs of a slowing global economy.
“Copper is moving on the dollar,” said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. “Industrial metals are getting some stabilization on the fact that demand still looks like it didn’t fall off the face of the earth.”
Copper futures for December delivery added 5.8 cents, or 1.8 percent, to close at $3.3585 a pound at 1:21 p.m. on the Comex in New York. Earlier, the price touched $3.371, the highest level for a most-active contract since Aug. 9.
Traders shrugged off a report that showed U.S. housing starts rose less than forecast in July and building permits fell to the lowest level in more than a year. Construction accounts for a quarter of all copper demand, according the Copper Development Association.
Metal Bellwether
“Copper is a bellwether, and the fact that it is holding up is a good sign” for the economy, McGhee said. “It is acting as a leader rather than a follower.”
On the London Metal Exchange, copper futures for delivery in three months added $132, or 1.8 percent, to $7,382 a metric ton ($3.35 a pound).
The metal may fall to $6,500 a ton in “coming weeks,” Bank of America Merrill Lynch said.
“We see downside risks to base prices during the third quarter,” Merrill Lynch analyst Michael Widmer wrote in a report e-mailed today. Still, prices will rebound to an average $8,000 a ton in 2011, he said.
“Even though headwinds for copper demand have increased, we believe that supply additions will be insufficient,” Widmer said.
Also on the LME, aluminum, zinc, lead, tin and nickel prices gained.
To contact the reporter on this story: Millie Munshi in New York at mmunshi@bloomberg.net
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