Copper Heads for Weekly Gain on Speculation About Weaker Dollar

By Anna Stablum

Nov. 20 (Bloomberg) -- Copper headed for its biggest weekly gain in four weeks in London on speculation the dollar may fall further, spurring demand for alternative investments.

The U.S. Dollar Index, which gauges the greenback’s value against six currencies, slid to a 15-month low on Nov. 16. It has dropped 7.2 percent this year, making dollar-priced metals cheaper for holders of other currencies. That’s helped copper to more than double in 2009 even as inventories in warehouses monitored by the London Metal Exchange have climbed 24 percent.

“We think the dollar could weaken further before the year end,” Eliane Tanner, an analyst at Credit Suisse Group AG in Zurich, said by telephone. “That will support prices, but the rising LME warehouse stocks are a real risk.”

Copper for three-month delivery added as much as $75, or 1.1 percent, to $6,870 a metric ton on the LME. The contract was at $6,825 at 9:40 a.m. local time and has advanced 4.7 percent this week, the most since the week ended Oct. 23.

Copper for March delivery climbed 0.4 percent to $3.118 a pound on the New York Mercantile Exchange’s Comex division, heading for a third weekly gain in a row.

Inventories of copper monitored by the LME rose for a 14th day to 421,875 tons, the most since April 27. Stockpiles are headed for a 19th weekly increase.

“We need to see inventories coming down before prices could move higher again,” Credit Suisse’s Tanner said. “We expect prices to fall a little bit over the next few days.”

Chinese Consumption

Copper also has been helped this year by record first-half imports into China, the world’s largest consumer, and expectations of a pickup in demand as the world recovers from the worst recession since World War II. Global commodity demand will rebound in the first half of next year as China leads consumption, according to Macquarie Securities Group.

“The leap in demand for commodities in China this year has been quite staggering,” Macquarie analyst Jim Lennon said today at a conference in Hong Kong. “You can see where these commodities are going by the increase in production in China of goods like autos.”

Demand for metals probably will increase 5 percent annually on average for the next three years, and supplies may be “constrained in key commodities,” Paul Galloway, an analyst at Sanford C. Bernstein Ltd. in London, said in a report yesterday. He began covering the mining and metals industries with a “positive” stance, according to the report.

Commodities will likely attract a record $60 billion this year as investors seek to diversify assets, Barclays Capital said. Inflows so far this year are almost $55 billion, already above the prior annual record of $51 billion set in 2006, it said in a report. Total commodity assets under management will probably expand to $230 billion to $240 billion by the end of the year, it said.

Among other LME metals for three-month delivery, aluminum fell 0.3 percent to $2,024 a ton, and zinc added 1.5 percent to $2,249 a ton. Nickel rose 0.4 percent to $17,050 a ton, lead climbed 0.7 percent to $2,348 a ton, and tin gained 0.3 percent to $14,900 a ton.

To contact the reporter on this story: Anna Stablum in London at astablum@bloomberg.net