SINGAPORE, May 22: London copper held near a two week-high on Wednesday, supported by indications the U.S. Federal Reserve would continue its bond-buying scheme, a key driver of investment in global commodities.
Concerns that the world’s No.2 copper mine in Indonesia, Freeport McMoRan Copper & Gold Inc’s Grasberg mine, could face a prolonged closure after one of the country’s worst-ever mining disasters also supported prices.
‘Fundamentally, the supply side is strong enough to stabilise copper, but not strong enough to spark a turnaround. For that we need to see a resumption in demand,’ analyst Dominic Schnider at UBS in Singapore said.
Low inflation could encourage the extension of the Fed’s bond buying program, which is likely to provide near-term support for metals, he added.
Two senior Fed officials on Tuesday played down the chances the U.S. Central bank would signal a readiness to reduce its bond buying at its meeting next month.
More liquidity allows greater scope for investment in commodities, while a dollar weakened by debasement props up assets priced in the greenback as they become cheaper for holders of other currencies.
Three-month copper on the London Metal Exchange was barely changed at $7,377.75 a tonne by 0213 GMT, holding near a two-week high of $7,450 hit in the previous session.
The most-traded September copper contract on the Shanghai Futures Exchange was also steady, at 53,250 yuan ($8,700)a tonne.
Other supply disruptions — such as a landslide at Rio Tinto’s Bingham Canyon mine in Utah, the shutdown of India’s top copper smelter and some smelters in China cutting output due to a shortfall in their feedstock scrap metal — also cushioned copper prices.
But analyst Schnider cautioned that markets may surrender gains if a round of global manufacturing surveys on Thursday — from China, the United States and the euro zone — add to recent signs that a global economic revival was flagging.
(AGENCIES)
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