Copper Extends Rally as Investors Bet Stimulus Will Bolster Metal Demand

Copper rose for the third straight day in New York on demand from investors who bet the additional stimulus money pledged by the Federal Reserve will bolster the U.S. economy.

The Fed said last week it will purchase an additional $600 billion of Treasuries through June. Copper prices jumped 4.3 percent in the previous two days, reaching $3.9955 a pound on Nov. 5, the highest level in 28 months. The metal also rose on concern that a strike at the Collahuasi mine in Chile would worsen supply shortages.

“The retail investors continue to plow money into the copper market,” said Michael Gross, an analyst at OptionSellers.com in Tampa, Florida. “They are buying copper regardless what the dollar is doing on a daily basis.”

Copper futures for delivery in December added 0.8 cent, or 0.2 percent, to close at $3.9565 a pound at 1 p.m. on the Comex in New York. The metal has advanced 38 percent since July 1 as the dollar slumped and inventories dropped.

Copper may reach $4.20 by the end of this year and rise above its May 2008 record of $4.2605 in the first quarter of 2011, Gross said.

“Market participants are watching developments in Chile,” said Andrey Kryuchenkov, an analyst at VTB Capital in London. Collahuasi is the world’s fourth-biggest copper mine.

The strike, now entering its fourth day, may reduce production if it were to last more than a week, Hussein Allidina, a Morgan Stanley analyst, said in a report. The mine accounts for 3.3 percent of global production, Allidina said.

Copper is “best positioned in the base-metals group given depleting reserves and supply challenges caused by declining grades across the industry,” Moody’s analysts including New York-based Brian Oak wrote in a report dated Nov. 4.

On the London Metal Exchange, copper for delivery in three months rose $5, or 0.1 percent, to $8,660 a metric ton ($3.93 a pound).

Tin also gained in London. Nickel, aluminum, lead and zinc declined.

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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