Copper Hits Three-Year High on Bullish Chinese Economic Data

By Amrith Ramkumar Features Dow Jones Newswires

Copper prices rose to their highest level since August 2014 Monday, propelled by the latest sign of strength from the Chinese economy.

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Copper for December delivery closed up 3.4% at $3.2595 a pound on the Comex division of the New York Mercantile Exchange. Prices were on track for a sixth straight session of gains and have rebounded since falling from multiyear highs toward the end of September. On the London Metal Exchange, copper prices passed $7,000 a ton, a key technical and psychological barrier for investors.

After a relatively soft patch of economic data out of China, which is responsible for nearly half the world's copper consumption, the world's largest metals consumer has reasserted its economic strength. On Monday, data showed China's producer prices in September rose more than economists had projected. Analysts attributed some of the inflation gains to higher metals prices, which have risen in response to infrastructure spending.

Monday's data followed Friday numbers showing Chinese copper imports rose to a six-month high last month, while iron ore imports set an all-time high, the latest sign of demand growth from an economy that continues to drive industrial metals prices higher.

"There were some people that were expecting a slowdown," said Dane Davis, an analyst at Barclays, of the Chinese economy. "It still seems to be holding up pretty well."

Some investors remain cautious given the sharp rally in copper prices recently -- they have shot up more than 25% since early May -- and high speculative buying.

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Traders attributed some of Monday's gains to speculative activity on the Shanghai Futures Exchange. The most-actively traded copper futures contract on the exchange hit its highest level in 4 1/2 years Monday, Commerzbank analysts wrote in a note.

"It's still an overcooked type trade," said John LaForge, head of real asset strategy for the Wells Fargo Investment Institute. "I think this is as good as it gets."

Many analysts and investors will be keeping an eye on this week's Communist Party congress for clues about Chinese economic policy moving forward.

Oil prices rising also supported copper prices Monday because many investors trade the commodities in a single basket. U.S. crude oil futures were up 0.6%.

Among precious metals, gold for December delivery swung between small gains and losses and closed down 0.1% at $1,303.00 a troy ounce.

Some traders will be watching for more economic data and signals from the Federal Reserve this week. Doubts among investors that the Fed will be able to stick to its plans for gradual interest-rate hikes amid weak inflation have supported gold prices recently. The precious metal struggles to compete with yield-bearing assets like Treasurys as borrowing costs rise.

Write to Amrith Ramkumar at amrith.ramkumar@wsj.com

(END) Dow Jones Newswires

October 16, 2017 14:41 ET (18:41 GMT)