Oct 25, 2010 1:00 PM GMT+0400
Copper rose to the highest price in more than 27 months in London as the dollar weakened amid speculation that the Federal Reserve will unveil further bond purchases next week.
The U.S. Dollar Index, a six-currency gauge of the greenback’s strength, fell as much as 1 percent. It slid after Group of 20 leaders pledged to avoid “competitive devaluation” of currencies, stoking speculation that the Fed may buy more debt. Prices also gained as JPMorgan Chase & Co. said it will introduce a copper-backed exchange-traded fund.
“Copper and the rest of the metals are all predictably higher off the back of a dollar further weakened by the G-20 statements,” said Alex Heath, head of industrial-metals trading at Royal Bank of Canada Europe Ltd. in London.
Copper for delivery in three months climbed $180, or 2.2 percent, to $8,514 a metric ton at 9:40 a.m. on the London Metal Exchange. The contract touched $8,549, the highest level since July 7, 2008. Copper for delivery in December added 2 percent to $3.8745 a pound on the Comex in New York. All of the six main metals traded on the LME gained.
A weaker dollar makes metals denominated in the currency cheaper in terms of other monies and fuels demand for raw materials as an alternative investment. Commodities from crude oil to soybeans advanced. The Fed bought $1.7 trillion of securities in the first round of so-called quantitative easing. Fed policy makers will meet on Nov. 2-3.
The ETF will hold grade A copper and not trade underlying futures, JPMorgan Chase said in a filing to the Securities and Exchange Commission dated Oct. 22. ETF Securities Ltd., manager of $22 billion in assets, said Oct. 11 it was preparing to start exchange-traded commodities funds backed by six industrial metals.
“It’s the second of several announcements in this area,” Heath said of JPMorgan’s plan. “I expect more to follow. If they all take off, it will act as a new major ‘consumer’ in the market, with an inevitable increase in upward pricing pressure.”
Hedge funds raised bullish bets on copper futures to the highest level since January, according to U.S. Commodity Futures Trading Commission data. Speculative long positions outnumbered short positions by 26,150 contracts on the Comex in the week ended Oct. 19, the CFTC said Oct. 22. Net-long positions rose by 2,082 contracts, or 9 percent, from a week earlier.
LME copper stockpiles declined for a third day, slipping 0.1 percent to 368,375 tons, daily exchange figures showed. Orders to draw copper from LME stocks, or canceled warrants, gained 0.8 percent to 28,700 tons.
Imports of refined copper into China, the world’s largest consumer, declined for the first time in three months in September as lower domestic prices reduced the appeal of buying overseas, the customs service said. Inbound shipments totaled 241,771 tons, down 9.5 percent from August and 14.5 percent below the year-earlier figure.
Zinc and lead for three-month delivery on the LME touched the highest prices since Jan. 11. Shenzhen Zhongjin Lingnan Nonfemet Co., China’s third-largest zinc producer, shut its main zinc and lead smelter as of Oct. 21 after breaches of environmental rules.
“The lead and zinc smelter closure is way overdone, but being used as a convenient excuse for their strength,” RBC’s Heath said. “Both lead and zinc had lagged behind the likes of copper, nickel and tin because their short- to medium-term fundamentals had not matched those of their peers. As result, they are now outperforming and playing catch-up as some of the investment ‘value’ trades are unwound.”
Zinc rose 2.8 percent to $2,581 a ton after touching $2,600. Lead gained 2 percent to $2,580 a ton after reaching $2,600.
Full Story =