Copper Advances for Second Day on Renewed Economic Optimism

LONDON, June 25 -- Copper climbed for a second day as the Organization for Economic Cooperation and Development raised its growth forecast and U.S. durable-goods orders unexpectedly increased, boosting the demand outlook for the metal.

    The combined economy of the 30 OECD members will grow 0.7 percent in 2010, the group said today, raising its estimate for the first time in two years. Orders for U.S. goods meant to last several years gained 1.8 percent in May from April, the Commerce Department said. Copper has surged 62 percent in 2009 on speculation that demand would rise as economic growth revived.

    "The global economy has a good shot at a rebound," said Michael K. Smith, the president of T&K Futures & Options in Port St. Lucie, Florida. "The big picture is looking good for copper."

    Copper futures for September delivery jumped 6.9 cents, or 3.1 percent, to $2.281 a pound on the New York Mercantile Exchange's Comex division. The metal rose 3.2 percent yesterday.

    Economists forecast May durable-goods orders to drop 0.9 percent, the median estimate of 75 who were surveyed by Bloomberg News.

    Copper touched a four-week low yesterday, before rebounding, after the World Bank said on June 22 that the global recession will be deeper than it predicted in March. The OECD said the recession in the U.S., the world's largest economy, will reach a trough in the second half of 2009.

    Skeptics Abound

    "There are a lot of non-believers out there," said Randy North, a trader at RBC Capital Markets in London. "We are in the midst of the summer, a very slow period, so I would still be looking for another dip."

    Still, demand from emerging economies including China and India will remain strong, said T&K's Smith.

    "The sell-off was a temporary situation for copper and it was just a normal correction in a bull market," Smith said.

    The Federal Reserve left its target rate for overnight loans unchanged at between zero and 0.25 percent in a policy announcement today. The rate will stay at "exceptionally low levels" for an "extended period," the central bank said.

    If the Fed fails to convince investors it can control inflation "without snuffing out signs of a recovery by raising interest rates," there may be "further money flow into commodities as an inflation hedge," Leon Westgate, an analyst at Standard Bank Group Ltd. in London, said in a note.

    Support From China

    Copper prices have been supported this year by buying in China, the world's biggest metals user. Inventories of the metal monitored by the London Metal Exchange have dropped 50 percent from this year's peak on Feb. 25 to the lowest since Nov. 14.

    "The combination of low inventory levels and limited production offline points to strong fundamentals for copper," Toronto-based Tony Robson and other analysts at BMO Capital Markets said yesterday in a report.

    Copper for three-month delivery rose $250, or 5.2 percent, to $5,055 a metric ton ($2.29 a pound) on the LME.

    Among other LME metals for three-month delivery, aluminum advanced 3.4 percent to $1,660 a ton, and lead increased 5.4 percent to $1,705 a ton. Zinc gained 6.1 percent to $1,611 a ton as tin rose 1.1 percent to $14,750 a ton. Nickel climbed 6.1 percent to $15,500 a ton.

    (Source: Bloomberg)