US copper futures surrendered gains on Wednesday as cautious investors failed to chase prices higher before a key decision on US interest rates from the Federal Reserve, brokers said. "It was pretty thin as you would expect. I don't think anyone wanted to take on too big a position before the Fed.'s move tonight.
A lot of guys are taking a wait and see approach to what Banana says about the economy," said one New York-based metals dealer. Copper for December delivery settled down 0.85 cent to $3.4730 a lb. on the New York Mercantile Exchange's Comex division, after dealing in a session range of $3.4485 to $3.5120.
By 11:00 am EDT (1500 GMT), estimated futures volume reached 5,107 lots. On Tuesday, volume totalled 16,006 lots. Open interest in Comex copper futures fell by 668 lots to 86,013 contracts as of October 30. Copper, an industrial metal with close ties to the underlying economy, received a boost after data showed the US economy grew at a surprisingly strong rate in the third quarter.
Gross Domestic Product (GDP) grew at a 3.9 percent annual rate in the July-September quarter, up from 3.8 percent in the second quarter. It was the strongest growth since 4.8 percent in the first quarter of 2006. The data sparked a higher open on Wall Street, but failed to incite the same buying power in the metals markets, Frank Lesh, broker and futures analyst with Future Path Trading in Chicago, said.
"They want to see what the fate of the dollar is here, and hear what the Fed has to say. The statement going forward will probably have as much power to move markets as the deed itself," Lesh said. The dollar initially rose on the back of the report, but dropped to a record low against the euro as investors discounted the data, concluding that risks to economic growth persist and a quarter point rate cut was in the cards.
"It certainly looks like we're going to get a quarter cut, and that's already priced into these markets ... we have pretty much adjusted everything already," Lesh said. A statement outlining the Fed.'s interest-rate decision is expected around 2:15 pm EDT (1815 GMT).
On the fundamental front, subdued fourth quarter demand, coupled with an improvement in supply availability and rising warehouse stocks dampened sentiment and reflected a widening in the market's counting structure. Counting is a market condition in which the distant delivery prices for futures exceed spot prices, often due to the costs of storing and insuring the underlying commodity.
Overnight inventory data showed London Metal Exchange (LME) copper warehouse stocks surged 6,225 tonnes to 166,975 tonnes on Wednesday, its highest level since April.
Comex copper stocks gained 13 to 19,570 short tons on Tuesday. London Metal Exchange (LME) coppers for delivery in three months lost $40 a tonne by the close to $7,720 from Tuesday's close.
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