Red metal adds more sheen

Copper closes at the highest level in three months

Copper prices ended substantially higher at Comex on Monday, 02 August 2010. A weak dollar coupled with strong rally in US stocks and better than expected economic data led to rise in prices. Copper closed at the highest level in three months.



At USA, copper futures for September delivery ended higher by 8 cents (2.4%) at $3.39 a pound on Monday. 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 2.8%.

On Monday, at LME, copper for delivery in three months ended higher by $95.75 (1.3%) at $7,392.25. 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 Monday, the dollar index, which tracks the strength of dollar against a basket of six other currencies, fell by 0.8%.

The Institute for Supply Management in US reported on Monday, 02 August 2010 that its manufacturing index fell to 55.5% in July from 56.2% in June. This was the third decline in succession but the figure was above the expected figure of 55%.

The ISM tracks the breadth of growth across firms, asking purchasing managers if business is better this month than last. Readings over 50% in the ISM diffusion index indicate that more firms are growing than contracting.

In a separate report, the Commerce Department reported that construction spending was up 0.1% in June. This was also higher than expected. However, spending in May was revised sharply lower to a 1% fall from the prior estimate of a 0.2% drop.

U.S. stocks opened and closed sharply higher as Asian and European stock markets posted solid gains after strong earnings reports from banking giants HSBC Holdings.

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 1.9% higher at $2,116 a ton and zinc ended 0.6% higher at $2,037 a ton. Nickel ended 2.6% higher at $21,700. Aluminum ended 0.8% higher at $2,192 a ton.

At the MCX, copper prices for August delivery ended higher by Rs 5.8 (1.7%) at Rs 344.15/Kg. Prices rose to a high of Rs 344.9/Kg and fell to a low of Rs 338.6/Kg.