Copper may rise for a third day in London as the dollar weakens before reports that might signal a deteriorating U.S. labor market, potentially spurring more steps by the Federal Reserve to spur growth.
The U.S. Dollar Index, a six-currency gauge of the greenback’s strength, fell to the lowest level since January as it headed for a fourth weekly loss. Figures due today will show higher initial weekly claims for jobless benefits in the U.S., and a monthly report to be released tomorrow will show an increased unemployment rate, according to economists.
“The greenback is taking a further beating, with attention turning to U.S. jobs reports,” said Andrey Kryuchenkov, an analyst at VTB Capital in London.
Copper for delivery in three months added $4 to $8,263 a metric ton at 11:57 a.m. on the London Metal Exchange. December-delivery copper gained 0.2 percent to $3.76 a pound on the Comex in New York.
Today’s figures, due at 1:30 p.m. London time, may show U.S. initial jobless claims rose by 2,000 to 455,000 in the week ended Oct. 2, according to a Bloomberg survey of economists. Tomorrow’s report will show that the unemployment rate in the country climbed to 9.7 percent in September, a separate survey indicates.
U.S. two-year Treasury yields matched a record low today on speculation that the Fed will resume asset purchases, or so-called quantitative easing. The central bank bought $1.75 trillion of mortgage debt and Treasuries from August 2008 through March of this year. Fed policy makers meet Nov. 2-3.
“The Fed is likely to announce large-scale purchases of duration assets,” David Thurtell, a Citigroup Inc. analyst in London, said in a report e-mailed today. “We see the immediate impact of QE2 as market-friendly, in similar fashion to the impact of QE1. Copper seems likely to push into the mid-$8,000s over the coming few months and above $9,000 by mid-2011.”
The first round of quantitative easing helped to boost gold prices by 8 percent, Bank of America-Merrill Lynch said this month. Thurtell cited estimates by Citigroup economists for a total program of $250 billion to $1 trillion.
The dollar index dropped as much as 0.4 percent. A weaker U.S. currency makes dollar-priced metals cheaper in terms of other monies.
Industrial production in Germany, the world’s third-largest copper user after China and the U.S., increased more than three times the pace economists forecast in August. Production jumped 1.7 percent from July, the Economy Ministry said.
LME copper’s 14-day relative strength index, a gauge of whether a commodity is overbought or oversold, was at 74.53. Some analysts and traders who study technical charts view levels above 70 as a signal that prices may be poised to retreat.
“Short-term upside for base metals might be limited, but we expect gains for most of them in the medium term,” said Thurtell. He pointed to emerging-market demand, supply limits and prospects for exchange-traded funds backed by industrial metals as the “main positives” in addition to prospects for more Fed asset purchases.
Commodity prices probably will stay “high by historical standards over the medium term, with risks tilted to the upside,” the International Monetary Fund said yesterday as it raised its forecast for global economic growth this year to 4.8 percent from 4.6 percent.
In Chile, the world’s largest producer of copper, workers at Anglo American Plc and Xstrata Plc’s Collahuasi mine rejected a wage offer and will enter talks over new contracts ahead of an Oct. 31 deadline, union official Manuel Munoz said in an interview yesterday.
LME copper stockpiles fell to 373,450 tons, the lowest level since Nov. 2, exchange figures showed. Orders to draw copper from inventories, or canceled warrants, rose 20 percent, the most since Sept. 15, to 19,625 tons, after 11 declines in a row through yesterday, the longest such streak since August 2007.
Tin for three-month delivery on the LME rose 0.6 percent to $26,400 a ton after touching a record $26,790 a ton in the previous session. The metal is this year’s best LME performer, up 57 percent, after production disruptions in Indonesia and Democratic Republic of Congo bolstered prices.
Aluminum gained 0.6 percent to $2,378 a ton and nickel declined 0.4 percent to $24,710 a ton. Lead fell 0.5 percent to $2,303.75 a ton and zinc lost 0.3 percent to $2,327 a ton.