Dec 9, 2010 (Bloomberg) -- Copper climbed to a record in London and advanced to a 31-month high in New York on concern that the Federal Reserve may extend asset purchases to support the economy, driving the dollar lower and boosting the appeal of commodities as alternative investments.
The metal for three-month delivery on the London Metal Exchange rose as much as 0.6 percent to $9,066 a metric ton on the London Metal Exchange, surpassing the previous peak of $9,044 on Dec. 7. It traded at $9,037.25 at 11:30 a.m. Singapore time, up 23 percent this year.
"We continue to seek higher prices as the fundamentals remain supportive,” Li Rong, chief analyst at Great Wall Futures Co., said from Shanghai. "This includes the potential for a supply deficit, inflationary expectations and weaker currencies.”
Copper on the Comex in New York gained to $4.144 a pound, the highest price since May 2008, when it reached a record $4.2605. The metal for March-delivery on the Shanghai Futures Exchange added as much as 3.6 percent to 67,850 yuan ($10,193) a ton, the highest price since Nov. 12.
Demand for the metal used in construction and automobiles will outpace supply by 367,500 tons next year, according to the median forecast of 12 analysts surveyed by Bloomberg. This is the first shortage since 2007, according to the International Copper Study Group, which forecast a 435,000-ton deficit in the refined metal next year.
Stockpiles in LME warehouses have shrunk 30 percent this year and may drop to an all-time low of less than one week’s usage, according to Bank of America Merrill Lynch. Inventories stood at 350,250 tons yesterday, the lowest since October 2009.
Copper’s rally has been fueled by speculation that the Federal Reserve will boost asset purchases, hurting the greenback and making dollar-denominated commodities more attractive to holders of other currencies.
The dollar fell for the first time in four days against a six-currency basket, dropping as much as 0.4 percent, before U.S. policy makers meet on Dec. 14 to discuss a potential plan to extend Treasure purchases beyond the $600 billion already announced.
"Copper has everything going for it except the risk of a slowdown in China,” said Li.
China’s statistics bureau will release November economic data on Dec. 11 at 10 a.m. local time. The data, which include consumer prices, retail sales, fixed-asset investment and industrial output, were originally scheduled to be released on Dec. 13, heightening speculation the People’s Bank of China will raise interest rates this weekend.
Expectations that the central bank will raise borrowing costs again have grown after the ruling Communist Party announced on Dec. 3 the country will shift to a "prudent” monetary policy next year from a "moderately loose” stance as the government seeks to combat accelerating inflation. Consumer prices gained 4.4 percent in October, the fastest pace in two years, because of higher food costs.
Zinc in London dropped 1.6 percent to $2,273 a ton, lead lost 0.2 percent to $2,400 a ton, and aluminum shed 0.3 percent to $2,365 a ton. Nickel advanced 0.7 percent to $24,168 a ton, and tin climbed 1 percent to $25,850 a ton.