US copper ends firm as commods rally gathers steam
NEW YORK, Feb 27 (Reuters) - U.S. copper futures rallied to a fresh 21-month peak Wednesday as more and more investment fund money flowed into the broader commodity complex as a hedge against inflation, traders and analysts said.
"Commodities are the allocation and the place to be. Anything that has the tag commodity on it is running higher, because economically, it is diverging itself," said Zachary Oxman, senior trader with Wisdom Financial in Newport Beach, California. "Copper is not trading on its own fundamentals anymore. It is trading on a general commodities bid."
Copper for May delivery HGK8 rose 5.80 cents to settle at $3.8505 a lb at the New York Mercantile Exchange's COMEX division, after dealing between $3.80 and a new life-of-contract high of $3.8785.
For the year, May copper is up over 26 percent and may extend its 2008 rally as more and more investment money moves away from bonds and under-performing equities and into alternative assets, like the physical commodities.
"For the time being we see no reason why the base metals complex, along with the rest of the commodities sector, cannot continue to move higher," analysts with RBC Capital Markets said in a daily market overview. "Clearly they are now in danger of getting ahead of the fundamentals but the wall of money looking for a home has a habit of ignoring little things like this which must now be a matter of some consternation to the legion of bears that proliferated this sector until quite recently."
The new spot March copper contract HGH8 ended up 5.90 cents to $3.8380, after hitting a new contract- and 21-month high of $3.8625.
Copper hit an all-time record high of $4.16 in May 2006.
Final estimated futures volumes totaled 22,820 lots, up from Tuesday's final count of 19,746 lots.
Open interest in the market rose by 516 lots to 101,872 contracts open as of Feb. 26.
Dollar-denominated copper received additional support from a record low in the American currency, which slid below $1.50 per euro EUR= for the first time, after Federal Reserve Chairman Ben Bernanke signaled the U.S. central bank will continue to cut interest rates.
"The (Fed) will be carefully evaluating incoming information bearing on the economic outlook and will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks," Bernanke said.
The Fed has lowered benchmark overnight interest rates to 3 percent from 5.25 percent since mid-September and financial markets expect policy-makers to lower them by a further half-percentage point at their next meeting on March 18.
On the fundamental front, Zambia and foreign owners of its copper mines agreed to impose a 35 percent power tariff increase effective January this year, with authorities warning of possible power cuts to the mines due to a power generator fault.[ID:nL27760265]
Inventory data showed London Metal Exchange warehouse stocks decline by 2,525 tonnes to 146,600 tonnes on Wednesday. COMEX inventories fell by 338 short tons to 13,551 short tons on Tuesday.
London copper for delivery in three-months MCU3 hit a session high of $8,480 a tonne before settling at $8,440, up $165 from Tuesday's close. (Reporting by Chris Kelly; Editing by Marguerita Choy)
