Copper prices benefit from strong new home sales data

Lower dollar aids further in prices going up

Copper prices ended higher for sixth straight day at Comex on Monday, 26 July 2010. Lower dollar and better than expected report on the housing front led to higher metal prices on Monday. Copper is heavily used in construction wiring and benefitted from the new home sales news.



At USA, copper futures for September delivery ended higher by 4 cents (1.2%) at $3.22 a pound on Monday. Last week, copper ended higher by 8.5%. For second quarter, copper dropped 16%. Copper gained about 6% for the first quarter, buoyed by data from the U.S. and other countries reinforced expectations that the global economic recovery was on track. On a year to date basis, in 2010, copper is lower by 2.3%.

On Monday, at LME, copper for delivery in three months erased earlier losses and ended higher by $28.75 (0.4%) at $7,057.75. Prices had crossed the $8,000 mark for first time since 2008 on 6 April. On 3 July, 2008, prices had touched an all time intra day high of $8,940. Copper ended FY 2009 higher by 140%.

The Commerce Department in US reported on Monday, 26 July 2010 that U.S. sales of new homes rose 23.6% in June to a seasonally adjusted annual rate of 330,000. The figure was better than expected.

The report detailed that in June, the number of unsold new homes on the market slipped 1.4% to 210,000, the fewest since September 1968. That represented a 7.6-month supply at the June sales pace, less than the 9.6-month supply in May. The median sales price of $213,400 in June was down 0.6% compared with a year earlier.

The report also showed that new-home sales for May plummeted a revised 36.7% to a record low 267,000 level after a federal subsidy for home buyers expired. This is a steeper drop than the 32.7% fall and 300,000 in annualized sales that the government initially estimated.

In the currency market on Monday, the dollar index, which measures the strength of the dollar against a basket of six other currencies, fell by 0.2%.

The U.S. buys about 13% of the 17 million metric tons of copper sold annually and China buys about 20%. Copper fell for three months in a row through June on concern about efforts to curb growth in China, the world's biggest user of the metal.

Copper ended substantially higher last year on expectations of revived global economic growth along with a decline in the dollar. The dollar index had dropped almost 4.2% last year. The metal was also pushed higher by record first-half imports to China, the world's largest user.

Among other metals traded in the LME on Monday, lead ended 0.6% higher at $1,990.25 a ton and zinc ended 2.3% higher at $1,950 a ton. Nickel ended 1% higher at $20,560 Aluminum ended 1.3% higher at $2,056 a ton.

At the MCX, copper prices for August delivery ended higher by Rs 2.3 (0.7%) at Rs 333.9/Kg. Prices rose to a high of Rs 334.8/Kg and fell to a low of Rs 328.05/Kg.