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Copper Settles at Five-Month High

September 14, 2012, 3:34 p.m. ET

By TATYANA SHUMSKY
NEW YORK—Copper futures rocketed to their highest settlement in five months as investors flocked to buy the industrial metal in the wake of the Federal Reserve's decision to embark on a third economic stimulus program.

The most-actively traded contract, for December delivery, rose 12.25 cents, or 3.3%, to $3.8325 a pound on the Comex division of the New York Mercantile Exchange. This was the highest settlement price since April 3.

Investors continued to laud the central bank's Thursday decision to support U.S. economic growth with a third round of stimulus. The Federal Open Market Committee said it would buy $40 billion in agency mortgage-backed securities a month as it aimed to cut long-term interest rates and said it expects short-term rates to remain near zero until 2015.

Copper wires and pipes are widely used in construction and manufacturing, and demand for such products tends to rise as economic activity expands.

The Fed's past printing efforts translated into real demand for copper, said Bart Melek, senior commodity strategist with TD Securities. U.S. copper demand had been in decline in the wake of the financial crisis, falling 18% year-on-year in 2009, before the Fed enacted its second bond-purchasing program, known as QE2.

"We got a big jump in industrial activity and a recovery in housing," he said, adding that by the fourth quarter of 2011, U.S. copper demand was up 9.4%, to 424,000 metric tons, from the same period of 2010, when QE2 was launched.

This time, as the Fed aims to cut borrowing costs and bolster the housing market, Mr. Melek expects to see another uptick in U.S. demand for copper.

"The Fed wants to repair the transmission mechanism for monetary policy, which had traditionally been housing," Mr. Melek said.

http://online.wsj.com/article/SB10000872396390444023704577651853804677144.html?mod=googlenews_wsj


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News Summary: Copper up on hopes for better demand

Originally published Friday, September 14, 2012 at 12:34 PM

GLEAMING COPPER: The price of copper rose on a bet that it may be one of the first commodities to benefit if the U.S., Europe and China prove successful in building up their economies. Investors consider copper a barometer of global economic health because it is used throughout manufacturing.