copper has biggest weekly gain in four months

Copper Has Biggest Weekly Gain in Four Months on Home Sales

By Millie Munshi

Aug. 24 (Bloomberg) -- Copper jumped, capping the biggest weekly gain in four month, as U.S. home sales unexpectedly rose in July, quelling concerns that an economic slowdown may curb metal demand.

Sales of new homes increased 2.8 percent to an annual pace of 870,000 from a revised 846,000 rate in June that was more than estimated, Commerce Department data showed. Copper is up 17 percent this year as global demand outpaced production.

The home-sales report ``indicates that the U.S. economy is still moving ahead,'' said Patricia Mohr, an analyst at Scotiabank Group in Toronto. ``The global supply and demand balance remains quite tight.''

Copper futures for December delivery gained 7.35 cents, or 2.2 percent, to $3.35 a pound on the Comex division of the New York Mercantile Exchange. The metal gained 6.4 percent this week, the most since April.

Economists had expected purchases of new homes to drop by 1.7 percent, according to the median estimate in a Bloomberg survey of 73 economists.

Copper, used in pipes and wires, has fallen 17 percent from a record $4.04 a pound in May 2006 as the worst U.S. housing recession in 16 years slashed demand for the metal. Builders are the biggest users of copper in the U.S, putting about 400 pounds into the average home.

The metal also gained after a bigger-than-estimated increase in U.S. durable-good orders. Orders rose 5.9 percent in July, suggesting business spending remains a bright spot in the economy hobbled by the housing slump.

U.S. Demand

U.S. copper consumption dropped 3 percent in the five months ended May 31 after falling 6 percent in all of 2006, the International Copper Study Group said yesterday.

Still, worldwide demand exceeded production by 300,000 metric tons, as usage climbed in Asia. Chinese consumption surged 37 percent, and demand in India jumped 18 percent.

``China's demand for copper is probably going to pick up again,'' Mohr said. ``I would be not surprised if copper prices rallied.''

Earlier, the metal fell as much as 1.5 percent as global stockpiles rose to the highest in 12 weeks.

Inventories monitored by the London Metal Exchange gained 1,750 metric tons, or 1.4 percent, to 125,500 tons, the highest since June 1. Stockpiles have jumped 23 percent this month.

``People are looking at the LME inventories building, and they're getting concerned,'' said Eric Wittenauer, an industrial-metals analyst at A.G. Edwards & Sons Inc. in St. Louis.

Declines in Chinese inventories helped support the copper price, traders said. Stockpiles monitored by the Shanghai Futures Exchange dropped 18 percent to 73,241 metric tons, a weekly report showed today.

On the LME, copper for delivery in three months rose $64, or 0.9 percent, to $7,315 a metric ton ($3.32 a pound).

To contact the reporter on the story: Millie Munshi in New York at [email protected] .

Last Updated: August 24, 2007 16:42 EDT