Copper Trade Most Bullish Since October on Stimulus: Commodities

Copper Trade Most Bullish Since October on Stimulus
Copper rose 1.5 percent to $7,715.75 a metric ton this year on the LME after a 21 percent slump last year. Photographer: Oliver Bunic/Bloomberg

Copper traders are the most bullish in almost 11 months on mounting speculation central banks will do more to bolster growth, strengthening demand for metals.

Twenty-one analysts surveyed by Bloomberg said they expect prices to gain next week and five were bearish. A further four were neutral, making the proportion of bulls the highest since Oct. 14. Hedge funds are betting on higher prices for the first time since May and stockpiles in warehouses monitored by the London Metal Exchange, the largest metals bourse, dropped to the lowest level in almost four years.

Commodities, which entered a bull market last month, may rise another 10 percent, Jeffrey Currie, the head of commodities research at Goldman Sachs Group Inc., said in an interview. The European Central Bank yesterday held interest rates at a record low and President Mario Draghi said policy makers agreed to an unlimited bond-purchase program. Federal Reserve Chairman Ben S. Bernanke pledged in an Aug. 31 speech to promote growth with “additional policy accommodation as needed.”

“It’s really expectations of what the next round of initiatives will do for global growth,” said Carole Ferguson, an analyst at Fairfax IS in London. “It’s a good indicator of industrial activity. If there’s any recovery in demand, copper should go up quite a lot.”

Copper Prices

Copper rose 4.8 percent to $7,967 a metric ton this year on the LME after a 21 percent slump last year. Prices tripled as the Fed bought $2.3 trillion of debt in two rounds of quantitative easing from December 2008 through June 2011. The MSCI All-Country World Index of equities gained 10 percent since the start of January and the Standard & Poor’s GSCI gauge of 24 commodities added 4.8 percent. Treasuries returned 2.1 percent, a Bank of America Corp. index shows.

Speculators held a net-long position, or bet on higher prices, of 3,260 futures and options as of Aug. 28, U.S. Commodity Futures Trading Commission data show. They had wagered on price declines for the previous 14 weeks. Inventories tracked by the LME plunged 42 percent this year, sliding to 213,225 tons yesterday, the lowest since October 2008. They were at 215,950 tons today, bourse data show.

Prices will advance to $9,000 by the end of this year, Goldman’s Currie said in a Bloomberg Television interview from Singapore yesterday. The bank told investors to increase commodities holdings in June and a month later forecast a 27 percent gain in 12 months.

Central Banks

Bernanke said at the Kansas City Fed’s annual symposium in Jackson Hole, Wyoming that “nontraditional policies” shouldn’t be ruled out to boost growth and reduce unemployment. Policy makers next meet Sept. 12-13. Draghi pledged more than a month ago to do what’s needed to preserve the single currency.

Barclays Plc expects demand to outpace supply in the first half of next year before a glut emerges in the second half as output climbs and consumption growth weakens.

China’s government lowered its 2012 industrial output growth target to 10 percent on Sept. 5 from a December goal of 11 percent. The nation’s economy has slowed for six quarters. It consumes about 40 percent of all copper, Europe accounts for 18 percent and North America 11 percent, Barclays estimates.

Central bank action may not be enough to stave off slowing global growth that will crimp demand for commodities including copper, according to James Dailey, who manages $215 million at TEAM Financial Asset Management LLC in Harrisburg, Pennsylvania. The 17-nation euro area is contracting, and consumer confidence in the U.S. fell the most in 10 months in August.

Gold Holdings

Copper rallied 20 percent since reaching a 14-month low of $6,635 in October. Prices probably won’t fall below $3 a pound, or $6,614 a ton, as Chinese demand grows and mine expansions are delayed, according to Thomas Keller, the chief executive officer of Codelco, the world’s biggest producer. Demand will match or exceed supply, he said in an Aug. 31 presentation in Santiago.

In other commodities, 21 of 31 traders and analysts surveyed by Bloomberg said gold would climb next week and seven were bearish. Futures on the Comex exchange in New York rose 11 percent to $1,739 an ounce since the start of January, extending 11 consecutive annual gains. Holdings in gold-backed exchange-traded products reached a record 2,472 tons yesterday, data compiled by Bloomberg show.

Seven of 11 people surveyed expect raw sugar to drop next week and two predicted gains. The sweetener slid 16 percent to 19.60 cents a pound on ICE Futures U.S. in New York this year.

Crop Prices

Twelve of 27 people surveyed anticipate higher corn prices next week and the same amount said the grain will decline, while 17 of 27 said soybeans will rally and eight expect lower prices. Corn rose 24 percent to $8.01 a bushel this year as soybeans advanced 45 percent to $17.48 a bushel in Chicago. Both crops surged to records in the past month as the U.S. endured its worst drought in more than 50 years.

Global food prices were little changed last month after the biggest jump since 2009 in July, according to a United Nations’ Food & Agriculture Organization index. The S&P GSCI gauge of raw materials entered a bull market on Aug. 21, climbing more than 20 percent from this year’s lowest close on June 21.

“We could move marginally higher for most of the commodities on the back of monetary easing that we are likely to see in Europe and the U.S.,” Walter de Wet, head of commodities research at Standard Bank Plc, said from Johannesburg. “Gold and silver will be the biggest beneficiaries. Brent crude might benefit from it, too, and, to a lesser extent, base metals.”

Gold survey results: Bullish: 21 Bearish: 7 Hold: 3
Copper survey results: Bullish: 21 Bearish: 5 Hold: 4
Corn survey results: Bullish: 12 Bearish: 12 Hold: 3
Soybean survey results: Bullish: 17 Bearish: 8 Hold: 2
Raw sugar survey results: Bullish: 2 Bearish: 7 Hold: 2
White sugar survey results: Bullish: 2 Bearish: 7 Hold: 2
White sugar premium results: Widen: 2 Narrow: 0 Neutral: 9
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