US copper futures settled higher on Monday in extremely thin dealings, with most of the trade waiting on the sidelines ahead of Tuesday's US Federal Open Market Committee decision on interest rates, brokers said. "The market itself was just very quiet, with maybe a little bit of (short) covering and a little bit of day trading.
People getting in and out and going home flat," said one broker on the floor of the exchange. "Everybody's waiting on the Fed to see what he or she do with rates and where we go from there," he said. Copper for December delivery ended up 2.75 cents to $3.42 a lb. on the New York Mercantile Exchange's Comex division, near the upper end of its $3.3820-$3.4420 trading band.
Initial resistance in the benchmark December contract was seen at Friday's peak of $3.4650 followed by the psychological $3.50 level, floor dealers said. By 12:00 pm EDT (1600 GMT), futures volumes were estimated at only 4,748 lots, compared with Friday's final count of 13,571 lots.
Open interest increased by 644 lots to 70,002 contracts as of September 14. Most market participants believe the US Federal Reserve will lower the benchmark federal funds rate by at least a quarter percentage point from 5.25 percent when they meet on Tuesday to help cushion the economy from financial turmoil stemming from the supreme mortgage meltdown and a weak housing market.
Copper futures rose as much as 1.46 percent on Monday, with a 2,000-tonne drawdown in London Metal Exchange (LME) copper warehouse stocks overnight supporting expectations that demand for the industrial metal will pick up in the second half of the year.
"With the summer demand lull drawing to a close the expectation is for consumption to pick up against a background of still low global stocks (equate to 2.5 weeks) and supply-side issues," Robin Bar, metals analyst with investment bank UBS, said in a note to clients.
LME copper warehouse stocks declined by 3,850 tonnes last week, marking its second consecutive "down" week, and now stood at 133,750 tonnes on Monday. Comex copper stocks eased 60 at 20,458 short tons on Friday. On the labour front, workers at eight of Group Mexico's units, including major copper mine La Carded, voted to leave Mexico's 73-year old National Union of Mine and Metal Workers in favour of a new union.
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