Institutional investors also piled into the metal, a barometer for global industrial demand, hoping to bolster their books ahead of the year-end.

"This was window-dressing," said a trader of the late gains.

US March copper futures on the COMEX division of the New York Mercantile Exchange settled up 1.8 percent on the day at $3.6525 per lb after sources said a majority of Senate Republicans were expected to support the legislation.

That equates to a 6-percent rise for the year, partially offsetting the 23-percent drop seen in 2011, but it is still a far cry from the double-digit percentage rallies seen in 2009 and 2010. Prices dropped 2.8 percent in the fourth quarter.

Buying accelerated shortly before the settlement after sources said US Senate Republicans appeared to be coalescing around a potential solution to the US budget crisis.

Those hopes were dashed after the close when President Barack Obama told reporters an agreement to prevent tax increases from beginning on New Year's day was in sight, but the deal was not done.

Center>Copyright Reuters, 2012