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Zinc up .6%, Copper Climbs to a 27-Month High as Dollar's Slump Stokes Fed Speculation
By Maria Kolesnikova - Oct 14, 2010 5:10 AM PT

Copper rose to a 27-month high in New York and London as the dollar slumped before reports likely to fuel speculation that the Federal Reserve will ease monetary policy further to stoke economic growth.

The dollar fell to a 15-year low versus the yen and touched the lowest level since January against the euro amid expectations of further quantitative easing, or asset purchases by the Fed. A weaker dollar makes metals priced in the currency cheaper in terms of other monies and fuels demand for commodities as an alternative investment.

“All of the markets are being driven by the dollar,” said Nic Brown, an analyst at Natixis in London. “As renewed quantitative easing by the Fed appears increasingly likely, this is impacting directly upon currency markets, and metals are reacting in line with this, led by gold.”

Copper for delivery in December added 2 cents, or 0.5 percent, to $3.8405 a pound at 7:45 a.m. on the Comex in New York. The contract touched $3.8675, the highest price since July 2008. Copper for delivery in three months advanced 0.8 percent to $8,430 a metric ton on the London Metal Exchange and tin reached a record.

Gold for immediate delivery gained as much as 1.1 percent to an all-time high of $1,387.35 an ounce in London. Raw materials from rice to crude oil rose.

Trade Gap

Figures due at 8:30 a.m. New York time may show slower gains in U.S. wholesale costs last month, while the trade deficit probably widened in August as imports stabilized following their biggest drop in more than a year, economists said. A report due tomorrow may show a weaker increase in U.S. consumer prices.

Fed Chairman Ben S. Bernanke will speak tomorrow on monetary-policy objectives and tools in Boston. He said on Oct. 4 that the central bank’s first round of large-scale asset purchases aided the economy and that further quantitative easing is likely to help more.

Copper will average $8,438 a ton next year, compared with $7,344 in 2010, Fred Demler, head of global commodities at MF Global, said at a seminar in London yesterday. The world is entering “a generally strong period for all commodities,” and copper, aluminum, zinc and nickel will rise in 2011’s first quarter, he said.

No “real whoppers” of new copper mines are being planned, and mine capacity growth probably will continue to “fall short,” BNP Paribas SA analyst Stephen Briggs said yesterday in a presentation.

‘Robust’ Fundamentals

“There is no big project coming to the market, and people are waking up to the fact,” Marc Elliott, an analyst at Fairfax IS in London, said today by telephone. “Where is it all going to come from? Long-term fundamentals remain very robust.”

LME copper stockpiles rose 0.1 percent to 371,500 tons, daily exchange figures showed. They have shrunk 0.7 percent so far in the fourth quarter after dropping by 27 percent in the prior six months.

“LME inventories are pulling back slightly, so that’s a fairly encouraging signal,” Elliott said. “And we are entering a seasonally stronger consuming period, particularly in China, which is the world’s largest consumer.”

Orders to draw copper from LME stocks, or canceled warrants, fell 2.1 percent to 23,850 tons.

Tin, Aluminum

Tin for three-month delivery on the LME rose 1.8 percent to $27,250 a ton after touching $27,300. The metal has jumped 61 percent this year, leading advances on the exchange, after production was disrupted in Indonesia and the Democratic Republic of the Congo.

Aluminum added 1 percent to $2,440 a ton. LME stocks shrank for a 21st day to 4.32 million tons. The streak of declines is the longest since March 14, 2005.

Cash aluminum’s discount to the three-month contract swelled yesterday to $36.25 a ton, the widest level since Dec. 29. Spot metal was at a premium of $2.25 to the three-month contract on Aug. 24.

Lead fell 0.2 percent to $2,430 a ton after touching $2,473, the highest intraday price since Jan. 19. Nickel dropped 0.1 percent to $24,375 a ton and zinc rose 0.6 percent to $

http://www.bloomberg.com/news/2010-10-14/copper-rises-to-27-month-high-climbing-for-a-third-day-as-dollar-slumps.html