Copper Extends Rally On US Data, Equity Gains

Apr 26, 2012 NEW YORK (Dow Jones)--Copper futures locked in a three-day winning streak Thursday, buoyed by improved U.S. home sales data, a weaker dollar and a firmer tone to U.S. equities.

The most actively traded contract, for May delivery, rose 6.70 cents, or 1.8%, to settle at $3.7670 a pound on the Comex division of the New York Mercantile Exchange.

The number of U.S. home buyers who signed contracts to purchase previously owned homes grew in March to the highest level since April 2010, according to a report from the National Association of Realtors.

Residential construction is a key end-user sector for copper as the industrial metal is made into electrical wires, cables and household plumbing.

"The home sale report was bullish for base metals notably copper which rallied strongly on the news," traders at RBC Capital Markets said in a note to clients.

Fewer Americans filed new applications for unemployment benefits this week, with jobless claims sliding by 1,000 to a seasonally adjusted 388,000 in the week ended April 21.

Copper prices rallied on the report. Copper is widely used in everyday goods like smartphones, laptops and cars, meaning slumps or upticks in the economy, and hence demand, are reflected in the market.

Equities and commodities also continued to draw support from the Federal Reserve's indication Wednesday that it would boost the U.S. economy if such help was required.

However, there are signs of caution in the physical copper market surrounding demand for the metal in China, the world's largest consumer of copper. A recent visit to duty-free or bonded warehouses in Shanghai had Standard Chartered analysts "astounded." 

"The staff car park was used to store copper. The driveway between warehouses was blocked by copper," they said in a report. Standard Chartered estimated that Chinese bonded-warehouse stocks are now at around 1 million metric tons.

Copper traders have been shipping metal from the U.S. and Europe to China since last October in hopes of an uptick in demand. However, with China's economy slowing the metal is instead collecting dust in storage.

Copper settlements (ranges include electronic and pit trading):
Apr $3.7680; up 6.75 cents; Range $3.7400-$3.7680
May $3.7670; up 6.70 cents; Range $3.6885-$3.7770