Base metals stay strong

Prices ignore weak housing data

Copper prices ended higher on Tuesday, 17 August 2010. Lower dollar and declining LME inventories pushed the appeal of commodities as a hedge against inflation offsetting a weaker than expected housing data.



At USA, copper futures for September delivery ended higher by 5.8 cents (1.8%) at $3.3585 a pound on Tuesday. Copper lost 2.7% last week. For the month of July, copper ended higher by 12% as concerns about a slowdown in the global recovery abated, pushing the red metal to its best month since April 2009.

Before this, 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 higher by 4.5%. On a yearly basis, copper has gained 20.7%.

On Tuesday, at LME, copper for delivery in three months ended higher by $132 (1.8%) at $7,382. 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%.

In the currency market on Tuesday, the dollar index, which weighs the strength of the dollar against a basket of six other currencies, fell by 0.5%. The dollar index dropped mainly due to the bounce by the euro.

Among economic data expected for the day, data showed that housing starts for July increased 1.7% month-over-month to an annualized rate of 546,000 units, which is less than the rate of 555,000 units that had been widely anticipated. Building permits for July fell 3.1% month-over-month to an annualized rate of 565,000, which is below the rate of 573,000 that had been expected.

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 Tuesday, lead ended 0.6% higher at $2,108.5 a ton and zinc ended 1% higher at $2,093.75 a ton. Nickel ended 0.5% higher at $21,750. Aluminum ended 0.5% higher at $2,151 a ton.

At the MCX, copper prices for August delivery ended higher by Rs 5.15 (1.5%) at Rs 343.55/Kg. Prices rose to a high of Rs 344.2/Kg and fell to a low of Rs 337.85/Kg.