BLBG: Copper Gains on Speculation Government Spending to Boost Demand
Copper rose for the third time in four sessions on renewed speculation that government spending on roads, bridges and other infrastructure projects will boost demand for the metal used in pipes and wires.
Heeding President Barack Obama’s appeals, the U.S. House is set to pass a stimulus plan to pump more than $800 billion into the economy to counter the deepening recession. Copper has climbed 6.1 percent in January, heading for the first monthly gain since June, on speculation demand will rise.
“The biggest component copper is going to benefit from is the U.S. stimulus spending on infrastructure projects,” said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. “We could see increased demand over the next three to six months.”
Copper futures for March delivery gained 1.15 cents, or 0.8 percent, to $1.496 a pound on the Comex division of the New York Mercantile Exchange. The price has climbed more than 7 percent since Jan. 22.
The metal also rose as the dollar dropped, boosting the appeal of commodities as a hedge against inflation, McGhee said. The greenback fell for the third straight day against a weighted basket of six major currencies.
Inflation concerns were also stoked before the Federal Reserve’s announcement today on lending policies. The central bank cut its benchmark rate to zero to 0.25 percent on Dec. 16.
‘Should Have Bottomed’
“Infrastructure plans and monetary inflation should put a floor on base metals,” Michael Pento, who helps oversee $1.5 billion at Delta Global Advisors in Holmdel, New Jersey, said in an e-mail this week. “Copper should have already bottomed.”
Copper may reach $1.80 in the next six months, said Pento, who correctly forecast copper in 2008 would post its first annual decline since 2001.
Still, today’s gains may be based on “false hope” as the U.S. stimulus plan won’t be enough to lift demand in the face of the global recession, said Gijsbert Groenewegen, a fund manager at Gold Arrow Capital Management in New York.
“What we’re facing is not a national problem, it’s an international problem,” Groenewegen said. “I don’t think this stimulus plan will change the fundamentals for copper. There’s still so much supply coming out of the mines, and any demand increase won’t be enough to overcome that.”
On the London Metal Exchange, copper for delivery in three months rose $20, or 0.6 percent, to $3,330 a metric ton ($1.51 a pound). The price reached a record $8,940 on July 2.
