Aug. 9 (Bloomberg) -- Copper rose in New York and London on speculation that the Federal Reserve will extend efforts to shore up the economy in the U.S., the world’s second-largest user of the metal after China. Analysts speculated that the central bank may announce a resumption of bond purchases, or so-called quantitative easing, after traders added to bets that the Fed will cut its benchmark interest rate or leave it unchanged by June 2011. Nonfarm payrolls in the U.S. fell more than estimated in July, government figures showed last week. “The continued optimism stems from hope that the Fed in its meeting tomorrow will further ease monetary policy and could begin using the proceeds from maturing mortgage-backed securities to buy other debt instruments or Treasury bonds,” Alex Heath, head of industrial-metals trading at Royal Bank of Canada Europe in London, said in a report. Futures for September delivery advanced 4 cents, or 1.2 percent, to $3.383 a pound at 9:05 a.m. on the Comex in New York. Copper for delivery in three months rose 1.3 percent to $7,463.75 a metric ton on the London Metal Exchange. All of the six main metals traded on the LME climbed, led by tin. Futures on the CME Group Inc. exchange show a 71 percent chance the Fed will cut its benchmark interest rate or leave it unchanged by its June 2011 meeting, compared with a 33 percent likelihood a month ago. Smaller Stockpiles The U.S. Dollar Index, a six-currency gauge of the greenback’s strength, fell as much as 0.2 percent today before erasing the drop. A weaker dollar makes metals priced in the currency cheaper in terms of other monies. Copper also gained today as inventories of metal continued to contract, signaling steady demand. LME prices gained 1 percent last week, the third weekly climb in a row. Stockpiles of copper tracked by the LME shrank for a fourth day to 410,475 tons, the lowest level since Nov. 17, according to daily exchange figures. They slid 8.3 percent in July, the most since June 2009, and are down 18 percent this year, on course for the first annual drop since 2004. Falling stocks suggest “that stronger-than-expected manufacturing activity is making headway into sizable inventory positions,” Macquarie Bank said in a report today. Canceled warrants, or orders to draw metal from stockpiles, dropped for a fourth session to 24,950 tons. Aluminum Gains Hedge-fund managers and other large speculators increased their net-long position in New York copper futures in the week ended Aug. 3, according to U.S. Commodity Futures Trading Commission data. Net-long positions rose by 15 percent, from a week earlier, the CFTC said in its Commitments of Traders report on Aug. 6. Aluminum for three-month delivery on the LME rose 0.6 percent to $2,205 a ton. Stockpiles of the lightweight metal in LME warehouses fell for a third day to 4.39 million tons. An estimated 70 percent of LME inventories are tied up in financing transactions, according to Mitsui Bussan Commodities, the industrial-metals trading arm of Mitsui & Co. The contango, cash metal’s discount to the three-month contract, narrowed to $7.50 a ton today, the lowest intraday level since May 2007, from the prior session’s $9.25, according to LME data. Tin added 3.1 percent to $21,375 a ton. The metal, mainly used in electrical soldering, climbed as high as $21,500, the highest intraday price since Aug. 22, 2008. Tin Inventories LME inventories dropped 1 percent to 14,895 tons. They reached 14,715 tons, the lowest level since June 1, 2009, on Aug. 5. A single party holds between 50 percent and 79 percent of stockpiled LME tin, according to exchange data as of Aug. 5. That was up from between 40 percent and 49 percent on July 27. Zinc gained 1.6 percent to $2,163.25 a ton. Stockpiles fell for a fourth day to 617,700 tons. Canceled warrants slipped 0.9 percent to 64,575 tons, or 10 percent of total inventories. Canceled warrants more than tripled on Aug. 6, the biggest jump since June 2006. The surge came on supply concern after a producer declared so-called force majeure, according to the Macquarie report. Force majeure is a legal clause permitting companies to avoid meeting contractual obligations because of circumstances beyond their control. Nickel gained 2.6 percent to $22,670 a ton after reaching $22,814, the highest intraday price since May 13. Lead rose 1.9 percent to $2,201.75 a ton.

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