Copper eases as dollar firms, drop limited

NEW YORK: COMEX copper fell moderately on Monday, reversing earlier gains, when the dollar turned positive following a strong US personal spending reading, but selling was limited as the industrial metal found support from a rallying US stock market.

Moves were limited in both directions by light volumes with the London Metal Exchange closed by a bank holiday and New York desks thinly staffed following a hurricane wracked US East Coast.

The benchmark US September copper contract sold on the COMEX exchange was down $1.25 at $4.0865 per lb., about mid-range for trading during August. Earlier, it rose to $4.1140 and fell as low as $4.0575 a lb.

Dollar strength put some pressure on copper prices when it gained against the yen and Swiss franc, as strong US consumer spending data reduced fears of another recession.

But, some participants noted that the rally in US equity markets and mixed US economic readings, should keep copper in range for the near term.

"It's down, not really believing in the positive recovery story that equities are trying to build. But with copper still above $4.0, it shows you that there's still positive demand in the marketplace for copper," said Adam Klopfenstein, Senior Market Strategist, at MF Global in Chicago.

He added that COMEX copper at $4.50, "might be a little pricey if there's still any type of risk of recession. But, if equity prices continue to build positive momentum, I think it's hard to stay bearish copper for long."

US consumer spending rose at its fastest pace in five months in July, a further sign the economy is not falling back into recession, although manufacturing activity in Texas almost stalled this month.

Consumer spending increased 0.8 percent on strong demand for motor vehicles as Japan-related supply restraints faded, a Commerce Department report showed on Monday. Spending had slipped 0.1 percent in June.

A slow-growth scenario rather than an outright contraction in economic output.

"Any time you get positive economic numbers, or any type of economic optimism even if it's reduced optimism, it's still better than the alternative which is negative asset prices and fears of recession," said Klopfenstein.

Copyright Reuters, 2011