Comex copper prices raced up to May 1996 highs after Federal Reserve Chairman Greenspan's congressional testimony created a recipe for copper gains by indicating that the US economy was growing at a healthy clip and the dollar had room to fall, traders said on Wednesday.
The dollar tumbled and US equity markets strengthened on the Fed chief's remarks, which implied increased demand for the red metal going forward, copper traders said.
Benchmark March copper closed 3.80 cents, or 3.23 percent, higher at $1.12160 a lb. On a three-month continuation chart, March copper soared to a fresh high dating back to May 1996, in a $1.1750 to $1.2180 range.
On a spot basis, copper shot up to a contract high of $1.2140, up 3.65 cents. Contracts beyond March 2005 were inactive. But among the active months, most set new contract highs.
The board settled with gains of 0.90 to 3.65. Comex estimated final copper volume at 24,000 lots, with more than half of the trading done in the last hour.
On Tuesday's turnover were 14,293 contracts. Open interest for Tuesday fell by 544 lots to 85,340 contracts.
Accelerating the buying, one trader said, was a trend of spread tightening all day. Moreover, many dealers went home short on Tuesday expecting more Chinese selling on Wednesday.
London Metal Exchange three-month coppers rallied to a steep peak dating back to May 1996 after the Fed chairman's comments.
It closed the on Wednesday evening kerb at $2,612 per tonne and surged to a high at $2,638, well above on Tuesday's close at $2,565 a tonne.
The session low was at $2,555. The latest indications of increasing growth come at a time when copper supplies continue to tighten.
For example, the declines in inventories have kept a cushion under copper prices. On Wednesday, LME copper warehouse stocks were down 4,150 tonnes at 332,175 tonnes.
Comex stocks fell by 761 short tons at 257,176 tons on Tuesday.
Comex is a division of the New York Mercantile Exchange.