US copper futures closed at a 3-week high on Friday, the first trading day of the year, with broad-based gains in the London base metals complex and a firmer tone in the price of crude oil fuelling the rally. Copper for March delivery rose 5.10 cents, or 3.6 percent, to end at $1.4610 a lb on the New York Mercantile Exchange's COMEX division, its highest closing level since December 11.
The session range from $1.3715 to $1.4850. The benchmark March contract is up over 16 percent from last week's plunge to $1.2550 a low dating back to October 2004 on a continuation basis. Copper extends a two-day rally amid some end-of-quarter index rebalancing that helped drive a 16 percent rally in London nickel futures and an almost-9-percent surge in the price of tin.
Once a year commodity index, compilers recalculate the weightings for the individual commodities in their indexes. The re-jigging early this month will fuel volatility and allow traders to make easy profits in the energy, metals, grains and livestock sectors. Additional upside momentum in the red metal seen from stronger tone in energy markets analysts.
Oil gained more than 3 percent in response to rising tensions in the Middle East and a dispute between Russia and Ukraine over natural gas supplies Copper strength bucks grim economic data showing US factory activity drop, to a 28-year low in December. The Institute for Supply Management said, its index of national factory activity fell to 32.4 the lowest since 1980 from 36.2 in November.
Edward Meir, metals analyst with MF Global said the gains will likely recede over the course of next week when participants return from holiday and conclude that the macro landscape looks depressingly unchanged from where they left it. COMEX copper stocks went up 260 short tons to 34,514 short tons as of Wednesday.
China increased, the value added tax to 17 percent from 13 percent on a wide range of imported ores and concentrates from January 1. Copper supported by news two key Chinese domestic smelters, Jiangxi Copper and Yunnan Copper, will lose production due to equipment malfunctions.
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