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Copper futures hit four-month high on Fed interest rate statement
By The Australian · January 26, 2012 · 9:42 am · Leave a Comment
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By Matt Day
COPPER futures edged higher overnight, settling at the highest price in more than four months as the Federal Reserve’s forecast for low interest rates into 2014 stoked investor demand for commodities.
The most-actively traded copper contract, for March delivery, rose 2.2 cents, or 0.6 per cent, to settle at $US3.8295 a pound on the Comex division of the New York Mercantile Exchange, the highest settlement price since September 16.
The Federal Reserve’s policy-making committee said overnight that it expected short-term interest rates to stay close to zero “at least through late 2014,” an outcome that could accelerate growth in the US economy.
Some market participants viewed the statement as increasing the chance of further steps by the central bank to prop up the economy, said Frank Lesh, a broker and analyst with FuturePath Trading. “For the moment, Europe is stable, though things can change quickly. There is a potential for more [quantitative easing] now after this statement than there was this morning.”
Copper is sensitive to such outlooks because of its widespread uses in construction and manufacturing, and low interest rates can make holding copper and other commodities more appealing compared with interest-bearing assets.
Also overnight, crude oil gained, and gold vaulted above the $US1,700 an ounce mark for the first time in six weeks.
The commodities market gains were also fuelled by the dollar falling after the Federal Reserve statement. A weaker dollar can boost dollar-denominated copper and other commodities by making the futures appear cheaper for buyers using other currencies.
Despite lingering economic gloom in Europe, the copper market has gained upward momentum in recent weeks, touching a series of multi-month highs. Chinese buyers have returned to the market to take advantage of the dip in copper prices from last year’s record highs, analysts say, lending support to prices.
“The market has been holding up brilliantly,” said Bill O’Neill, a principal with commodities consultancy Logic Advisors.
