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Comex copper propelled to higher close by funds

NEW YORK: New York copper futures shot to another firm close on Wednedsay, spurred on by a mix of fund buying and a surging aluminum price on the London Metal Exchange.

On Comex, the active March copper contract leapt 1.65 cents to end at 88.25 cents a lb, trading between 86.50 and 88.30 cents. January closed up 1.50 cents at 87.50 cents a lb and February settled at 87.75 cents a lb, up 1.60 cents.

"They were both performing well," said Frederick Demler, senior vice president and mineral economist for E D & F Man. "The fundamentals underlying all the base metals is (causing) the market to get more bullish."

Aluminum prices shot through and then closed at the technically-important $1,750 a tonne level in London, ending $26 above the 29-month high scored Tuesday.

A shortage of alumina and stronger global demand, has been giving a pillar of support to the rallying price. Alumina is the raw ingredient used to produce aluminum and that market has tightened up significantly since summer, when Kaiser Aluminum Corp's Gramercy, Louisiana, alumina refinery suffered from a debilitating explosion. Prices jumped from $140 a tonne at that time to up around the $400 a tonne level.

"The buying activity today was primarily fund buying," said Demler. "The market seemed to focus on the underlying bullish fundamentals."

Analysts have raised their forecast for industrial growth from 1.5 percent to 3.3 percent for 2000 with the major consuming regions of U.S., Europe and Japan expected to grow at a 3-3.5 percent rate, according to Demler.

Resistance levels on Comex have now become somewhat moving targets as every day seems to attract fund buying, sending prices higher. Some traders are putting nearby resistance at 88.50 cents, followed by 89.00 cents in the March contract.

Open interest in the March contract is now sitting around 56,000, which traders say is reaching stellar levels.

"The open interest is still going up so it's going to be some roll-over. It's very high for one month," said the Comex trader.

LME copper surpassed several levels as it ploughed upward, breaking through its $1,920 resistance to close at a 26-month high of $1,935 a tonne, up $31.

Final volumes were estimated at 14,000 contracts. Final official Comex copper turnover on Tuesday reached 10,695.

The nine-day relative strength index for March copper nudged further into overbought territory at 79, up from Tuesday's close at 65.

Technical analysts usually interpret an RSI reading of 70 or higher as indicating overbought conditions and 30 or below as oversold.-Reuters