US copper futures managed a higher settlement on Tuesday after spending most of the day in negative territory on some late local and speculative buying, though the market still held under a key technical level, market sources said.
Benchmark March futures at the Comex division of the New York Mercantile Exchange ended the day 0.70 cent higher at $2.0200 a lb., after dealing in a tight $2.0045 and $2.0260 lb. trading range. Spot December copper gained 0.55 cent to $2.1650 a LB, while deferred or back-month contracts collectively finished with gains of 0.80 cent.
"It's still struggling at that $2.03 to $2.0360 (a lb.) Area, but today was a solid up day.
It sets the stage for another test of that level tomorrow," said Scott Myers, senior trading analyst with Pioneer Futures, adding that a huge number of buy-stop orders hovered over that technical level. "It has to settle above $2.04 before it goes to $2.08 or $2.10, but if the market breaks below $1.96 on a settlement, you might be able to see another 8 to 10 cents to the downside.
That $2.0360 is really a big number," Myers also said. Volumes continued to be quiet this week with many desks thin due to traders away on holiday. Comex final copper volume was estimated at 6,000 lots compared with Monday's official count of only 5,644 lots.
Open interest in the copper market eased 184 lots to 101,990 lots as of December 19. For the year, copper prices rallied some 60 to 70 percent, but some in the market questioned if the aggressive fund buying that propelled price to record territory will continue into 2006 or will the market succumb to an overdue correction.
"Metals look set to end 2005 on a high note (although there is still time for another price upset as was seen in the last days of 2004)," wrote William Adams, metals analyst with BaseMetals.com.
"There is however, plenty of bullish talk of more funds lining up to get involved in commodities in 2006 and if this turns out to be the case then metal prices may well stay higher for longer or at least be cushioned on the downside if the fundamentals start to soften, which they look set to do.
However there is an ongoing danger of becoming too complacent and you have to ask whether fund buying alone will be enough to keep prices aloft when the copper market shifts into surplus." On the economic front, the dollar firmed against the euro following a double dose of US economic data that singled an environment of tame inflation and solid economic growth.
The US producer price index fell 0.7 percent in November from a 0.7 percent rise in October. November housing starts rose to an annual rate of 2.123 million units compared with 2.017 million units in October.
The market had expected a decline in PPI of 0.5 percent and an annual rate in housing starts of 2.017 million units.
Following the reports, the euro slipped to a session low of around $1.1841, from about $1.1960 shortly prior to their release.
In afternoon trading in New York, it was lasting trading at around $1.1860.
A stronger dollar tends to lower the value investment in dollar-denominated assets like copper for overseas investors.
London Metal Exchange copper closed lower on a late bout of selling while the market remained wary of further large-scale liquidation before year end.
Three-month copper fell $10 to finish at $4,410 a tonne from Monday's kerb close.
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