US copper futures closed with healthy gains and spot copper finished at a new 16-year high on Friday as further drawdowns in copper supplies and tightness in nearby contracts sparked short-cover buying that lead to new long fund positions, traders said. "It started out with short-cover buying on the tightness in London and the drop in inventories, but then there was heavy fund participation," said one copper trader.
At the New York Mercantile Exchange's Comex division, copper for July delivery closed at the high of $1.5625 a lb., up 1.55 cents from a low at $1.5440 a lb.
For most of the week, July copper traded in a limited range near current levels as it consolidated its rise to a 16-year peak in the three-month contract to $1.58 on Monday.
One technician said his chart showed on Monday's close at $1.5640 for Comex July futures' was the highest settlement price on record for a front-month contract.
On Friday's close came in second at $1.5625 a lb. June Comex copper finished at the highest spot price since November 1988. Spot copper closed at $1.6320, up 3.00 cents a lb.
Later-dated contract were only active out through February 2006 on Friday and finished from 0.15 to 1.75 cents higher. Buying was brisk with Comex estimating final copper volume at 21,000 lots, well above the 15,257 tally on Thursday.
Scott Meyers, senior-trading analyst at Pioneer Futures, said he thought the strong close in copper, along with a number of other metals, was a bullish sign.
"I think we're going to $1.60. I think these metals are going higher. The whole complex looks very good," he said. While there could be some corrective selling, technical traders said they saw Comex July copper's declines limited to $1.5250 a lb. and possibly $1.51 over the near term.
At those levels, some traders said they thought funds would look to renew copper purchases. Some traders used the dollar's strength against the euro after a smaller-than-expected US trade gap as a cue to take quick profits ahead of the weekend.
The euro tumbled to its lowest level in nearly nine months when the dollar was lifted by a narrower April US trade gap than was forecast. The US trade shortfall was just under $57 billion in April and had been forecast at $58 billion. Moreover, the March deficit was downwardly revised to $53.56 billion. Dollar gains tend to make holdings in dollar-denominated assets like copper less valuable to overseas investors. The tightness in prompt copper delivery in London sent prices higher and kept them propped into the close. In addition, declines in exchange warehouse inventories to historically low levels continued to be supportive.
On Friday's 2,000-tonne drawdowns of LME copper warehouse stocks sent the total down to a new 31-year low at 38,625 tonnes. Comex inventories fell by 709 short tons to 19,112 tons on Wednesday's daily report. London Metal Exchange three-month copper ended just under the session high at $3,001 per tonne, up from Thursday's close at $3,249 a tonne.
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