Forexpros – Copper futures edged higher on Tuesday, as investors carried over Monday’s optimism following dovish comments by Federal Reserve Chairman Ben Bernanke, but gains were limited amid lingering concerns over China’s economic growth outlook.
On the Comex division of the New York Mercantile Exchange, copper futures for May delivery traded at USD3.894 a pound during European morning trade, easing up 0.17%.
The May contract traded in a range of USD3.904 a pound, the daily high and a session low of USD3.874 a pound.
Copper prices rallied nearly 2% on Monday to hit a one-week high after Fed chief Bernanke said that “continued accommodative policies” are needed to bring about big gains in the U.S. jobs market, which he described as “far from normal,” despite a recent improvement.
Markets interpreted the comments as an indication the central bank will maintain its ultra-loose monetary policy and reinforced the view that further easing from the central bank may be possible.
The possibility of further easing weighed heavily on the U.S. dollar, which traded at a four-week low against the euro and the Swiss franc and a five-month low against the pound.
The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was down 0.12% to trade at 79.01, the lowest since March 2.
A weaker dollar boosts demand for raw materials as an alternative investment and makes dollar-priced commodities cheaper for holders of other currencies.
But ongoing concerns over a ‘hard landing’ in China continued to weigh on the industrial metal. Profits at Chinese industrial companies fell in the first two months of the year for the first time since 2009, adding to concerns over the Asian nation’s economic outlook.
China’s National Bureau of Statistics said in a report earlier that Chinese industrial companies reported a 5.2% drop in net profit in the first two months of the year, as slowing exports and a government campaign to cool property prices weighed.
Concerns over a possible slowdown in China resurfaced last week, after data showing that manufacturing activity contracted for the fifth consecutive month in March.
Beijing recently downgraded its growth outlook for 2012, while investors were spooked by a large trade deficit for February and comments last week from mining giant BHP Billiton that the nation’s demand for iron ore will flatten amid a slowdown in China’s economy.
China is the world’s largest copper consumer, accounting for almost 40% of world consumption last year.
A deeper slowdown in China, the world’s second biggest economy, would impair a global expansion that is already faltering because of the implementation of harsh austerity measures in Europe.
The industrial metal is regarded as a leading indicator of the global economy. It is used in the construction of buildings, power generation and transmission and the manufacture of consumer electronics.
Elsewhere on the Comex, gold for June delivery rose 0.4% to trade at USD1,695.05 a troy ounce, while silver for May delivery jumped 1.1% to trade at USD33.11 a troy ounce.
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