US copper futures closed the week at a 16-year high on Friday, after the US payrolls report hit the dollar when it showed much weaker-than-expected growth in May, traders said. But they were quick to add that copper was already charging up to multi-year highs in response to a drop in exchange warehouse stocks to mid-1974 levels. "There seems to be pressure on copper, and some fresh interest in the nearby contracts, with stocks continuing to come down, and drawdowns in Asian stocks specifically," said one copper dealer.
At the New York Mercantile Exchange's Comex division, copper for July delivery settled the week at a 16-year closing high at $1.5575 per lb., up 4.10 cents. Heading into the London close, players sent July futures up to a contract high at $1.5680 in a buying frenzy.
On a spot basis, June Comex copper hit its highest level since late 1988 at $1.62 per lb. Final volume was heavy at 29,000 lots, up from 26,994 lots traded on Thursday. Funds bought copper heavily for much of the week and especially on Friday, traders said.
But some said they questioned how high red metal prices could go and how long they could sustain current peak levels. With funds back in the metal market, traders said, the dollar resumed its previous importance as a driver of copper prices.
A declining dollar can benefit investors of dollar-denominated assets like copper in overseas markets.
"The reason copper was tied to the dollar was because funds were involved. But, when they got out of the market a month or two ago, that connection disappeared.
But lately, there has definitely been some CTA (fund) buying," said one dealer. The dollar fell broadly against other currencies after the US jobs data came in much softer than expected. US may confirm payrolls grew by 78,000 after a 274,000 gain in April.
Economists had forecast a rise of 185,000 for May. The unemployment rate edged down to 5.1 percent, its lowest level since 5.0 percent in September 2001. The decline in copper inventories gave prices a jolt in the overnight copper markets that translated into a surge in Comex copper prices right from the start.
London Metal Exchange copper stocks were down by 950 tonnes at 42,275, their lowest level since 1974. Meanwhile, Comex stocks fell 384 short tons to 21,218 tons on Thursday. LME three-month copper jumped to $3,270 per tonne on Friday's close, up sharply from Thursday's kerb close at $3,174.
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