Sept. 19 (Bloomberg) -- Copper rose to a six-week high on speculation the U.S. Federal Reserve's cut in borrowing costs will bolster the economy and stoke demand for metals.
The Fed yesterday lowered its benchmark rate by half a percentage point, more than forecast by many economists, to 4.75 percent. Copper, which sometimes moves in line with economic expansion, has dropped 2.4 percent in the past two months on U.S. growth concerns. The metal reached a record $4.04 a pound in May 2006.
``We're going to hit all-time highs in copper,'' said Michael Smith, president of T&K Futures & Options in Port Saint Lucie, Florida. ``Now is the time to be buying copper. Industrial metals, especially, are going to benefit from this rate cut.''
Copper futures for December delivery jumped 12.75 cents, or 3.7 percent, to $3.5755 a pound on the Comex division of the New York Mercantile Exchange. Earlier, the price reached $3.605, the highest since Aug. 2.
The metal has gained fourfold in the past four years as a global economic expansion increased demand for copper used in homes, cars and appliances.
Demand outpaced supplies by 328,000 metric tons in the seven months ended July 31, the World Bureau of Metal Statistics said today. Consumption in the period climbed 4.6 percent from a year earlier, while production expanded 2.4 percent.
Weaker Dollar
A weakening dollar will also boost the copper price as the commodity becomes cheaper for buyers holding other currencies, Smith said. The dollar sank to a 15-year low against six major currencies today after the Fed cut rates yesterday.
``The lower dollar is going to boost any commodity that's priced in dollars,'' William O'Neill, a partner at Logic Advisors in Upper Saddle River, New Jersey, said in an interview yesterday. ``Copper will eventually test the $4 level.''
Copper's gains may be limited by concerns that the U.S. housing slump is deepening, traders said. Homebuilders in the U.S. began work on the fewest homes in 12 years in August, the Commerce Department said today. Builders are the biggest consumer of the metal in the U.S., the second-largest copper user after China.
Housing starts dropped 2.6 percent, more than forecast, to an annual rate of 1.33 million, the agency said. Building permits, a measure of future construction, dropped 5.9 percent to a 1.307 million pace, also the lowest since 1995.
Copper has fallen 11 percent from its record-high as the worst U.S. housing recession in 16 years reduced demand for the metal and slowed the economy. U.S. copper consumption dropped 2.7 percent in the first half, the International Copper Study Group said today.
On the London Metal Exchange, copper for delivery in three months gained $300, or 4 percent, to $7,885 a ton ($3.58 a pound).
MRX Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
