Copper Climbs to Two-Month High on Optimism Greece Won’t Default

Copper climbed to a two-month high, set for its first monthly gain in four, after Greece passed austerity measures needed to secure financial aid, easing concern of a default that may destabilize the banking system.

Three-month copper on the London Metal Exchange gained for a third day, rising as much as 0.5 percent to $9,369.50 a metric ton, the highest price since May 3. The metal last traded at $9,365 by 2:46 p.m. in Singapore, up 1.6 percent in the past month on optimism demand in China, the world’s largest metals user, will improve.

Aluminum and nickel also joined an advance in stocks and other commodities including oil as the euro rose to a three-week high against the dollar on prospects the European Central Bank will raise interest rates next week to cool inflation.

“The weaker U.S. dollar and passing of austerity measures by Greece’s parliament boosted sentiment and demand expectations,” Lachlan Shaw, an analyst at Commonwealth Bank of Australia, wrote in an e-mail today.

The dollar dropped for a fourth day against a six-currency basket including the euro before reports forecast to show European consumer price gains accelerated in June while business activity in the U.S. cooled. European Central Bank President Jean-Claude Trichet said June 28 policy makers are in “strong vigilance mode.”

Copper on the Comex in New York rose as much as 0.6 percent to $4.2495 a pound, while metal for September delivery on the Shanghai Futures Exchange gained as much as 2.5 percent to 69,750 yuan ($10,789) a ton.

Inventories in LME warehouses in South Korea, Singapore and Malaysia, the locations nearest to China, dropped for a ninth day yesterday to 182,025 tons. Stockpiles have fallen 4.3 percent in the past two weeks.

Quarterly Performance

Copper is still heading for a second quarterly drop, on concern higher consumer prices may slow growth from China to Europe, thus reducing demand for industrial metals.

“Inflation is a problem that isn’t going to go away in the near term and central banks around the world will have to start tightening, which will drain the liquidity that helped push prices up in recent years,” said Liang Haisan, an analyst at Citic Newedge Futures Co.

Central banks around the world are weighing inflation against slowing growth after accelerating food costs pushed consumer prices higher. China has paused for 12 weeks in raising interest rates, the longest gap since increases began in October, as officials gauge the economy’s strength amid the debt crisis in Europe.

South Korea today cut its growth forecast while raising its inflation estimates after global demand weakened and energy costs climbed. The economy will expand 4.5 percent this year, down from a previous estimate of 5 percent, the Finance Ministry said today. Inflation is expected to rise 4 percent this year, exceeding an initial 3 percent target.

Aluminum in London climbed 0.2 percent to $2,537 a ton and nickel gained 0.7 percent to $23,225 a ton. Zinc and lead were little changed at $2,317.27 a ton and $2,636.75 a ton respectively, while tin fell 0.2 percent to $25,800 a ton.

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