Mar 27, 2012 NEW YORK (Dow Jones)--Comex copper prices slipped Tuesday as the dollar strengthened and some investors opted to lock in gains made on the previous day's rally.
The most actively traded contract, for May delivery, settled down 0.75 cents, or 0.2%, at $3.8800 a pound on the Comex division of the New York Mercantile Exchange.
Investors chose to cash in recent gains, forcing copper futures to retreat from recent highs. Copper had rallied 2.1% Monday after Federal Reserve Chairman Ben Bernanke signalled that interest rates would remain low to support the fragile U.S. economic recovery.
Copper prices tend to rise as the economy gathers momentum because the metal is used in both manufacturing and construction, and demand from these sectors improves as business activity increases.
Low interest rates also raise concerns about inflation and the value of paper currencies, and some investors tend to purchase commodities like copper as a hedge against these risks because hard assets are considered stores of value.
Copper futures also inched lower amid pressure from a stronger dollar. Copper futures are denominated in dollars and tend to appear dearer to market participants who use other currencies to fund their purchases when the greenback strengthens.
"We've got a little pause," said Frank Lesh, broker and future analyst with FuturePath Trading. "We were up at the top of our range yesterday and it wouldn't go through it."
Copper futures have traded in a tight range between $3.70 to $3.96 for more than two months, and some investors took the opportunity to lock in Monday's gains after copper prices climbed to the upper level of this range.
Elsewhere, polish copper producer KGHM Polska Miedz SA (KGH.WA) forecast a 2012 net profit of 3.8 billion zlotys ($1.22 billion) on revenues of PLN19.4 billion. The company expects to earn significantly less this year as 2011's profits were boosted by sales of stakes in telecommunication companies and because it has to pay royalties on copper and silver extraction to the Polish government for the first time this year.
Copper settlements (ranges include electronic and pit trading):
Mar $3.8790; down 0.65 cents; Range $3.8625-$3.8905
May $3.8800; down 0.75 cents; Range $3.8550-$3.9040