MELBOURNE, Sept 19: London copper jumped to a three-week top on Thursday, stretching its gains into a second straight session after the U.S. Federal Reserve stunned investors by maintaining its bond buying program, a key driver of investment in global commodities.
The Fed defied investor expectations on Wednesday by postponing the start of the wind down of its massive monetary stimulus, saying it wanted to wait for more evidence of solid economic growth, sparking a broad rally across shares, currencies and commodities in Asia.
‘The question is how long this euphoria is going to last,’ said Dominic Schnider of UBS Wealth Management in Singapore.
Brightening data from China over the next one to two months and developing negative sentiment towards the dollar will likely add to metals gains in the near term, he said.
‘But we are still going to be faced at the end of the year with tapering that is coming and a supply side that is in very good shape, so we may run out of steam into year end,’ he added. UBS sees copper supply growth at 6 percent this year.
Three-month copper on the London Metal Exchange, which rose to $7,305 a tonne — the highest since Aug. 28, was trading up 1.6 percent at $7,297.25 by 0155 GMT. Copper ended with gains of 1.5 percent in the previous session.
The Shanghai Futures Exchange is closed on Thursday and Friday for holidays.
‘I think metals are on the way up — looking at copper at $7,600 area in next few weeks,’ said one Singapore based trader.
‘The USD will weaken still because it looks like data is just not strong enough for a taper yet and the momentum in all asset classes should push the USD lower. I think this is going to be a short-term play,’ he added.
The dollar saw its biggest one-day drop in more than 2 months on Wednesday after the Fed’s decision and was languishing near a seven-month low against a basket of currencies on Thursday, supporting commodities priced in the greenback by making them cheaper for holders of other currencies.
Still, swelling supply is expected to keep copper prices constrained as the market swings into surplus this year.
Global miner Southern Copper expects to start work on two delayed copper projects in Peru next year and could see output as early as 2016. Peruvian miner Antamina expects to produce about 450,000 tons of copper in 2013, the same as last year, and will likely maintain that level of output in coming years.
In other metals, tin prices rose to the highest in almost 6 months at $23,250 a tonne, supported by a shortfall in supply from Indonesia. Lead and nickel rallied more than 2 percent.
Peruvian miner Minsur SA, one of the world’s biggest tin producers, will produce 30,000 tons of tin this year, steady from a year ago.
PRICES
Three month LME copper
Most active ShFE copper
Three month LME aluminium
Most active ShFE aluminium
Three month LME zinc
Most active ShFE zinc
Three month LME lead
Most active ShFE lead
Three month LME nickel
Three month LME tin
(agencies)
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