Copper with limited gains ahead of FOMC meeting

Copper gained on Monday, but remained limited amid speculation about the upcoming FOMC meeting and Ben Bernankes statement on the U.S. economy and the future of Feds Quantitative Easing program.

On the Comex division of the New York Mercantile Exchange, copper futures for July delivery traded at $3.200 a pound at 10:03 GMT, down 0.06% on the day, following an earlier gain. The industrial metal rose by 1.1% earlier in the session to hit a daily high at $3.238 a pound, highest level since June 13. Days low stood at $3.194.

Copper pricing, like other dollar-priced commodities, is directly linked to the greenback in an inverse relation, thus rendering any speculations about an earlier-than-expected monetary stimulus scale back strongly influential on commodities.

George Adcock, an analyst at Marex Spectron Group in London, said by e-mail for Bloomberg: “From a macro perspective, the market focus will be on the upcoming FOMC meeting, where participants will seek clarity on the aggressive monetary easing stance taken in the U.S. We stand by our assertion that a reduction in QE is highly unlikely for the foreseeable future. However, the mere discussion of it can severely dent investor sentiment and psychology.”

The industrial metals prices were pressured last week after the World Bank cut its global economy growth forecast. According to its report, the global economy will expand 2.2% this year, less than the previous projections of 2.4% in January. Gross Domestic Product in the European Union will contract by 0.6%, while the U.S. and Japan will show improvement, the World Bank said.

Also, copper prices have been under heavy pressure by Chinas demand outlook. The Asian country is the worlds biggest copper consumer and accounts for 40% of the global consumption. Recent figures showed Chinas manufacturing slowed down. The World Bank reduced its forecast for China’s economic growth to 7.7%, down from 8.4%. This comes after during the last week of May the IMF cut its economy growth forecast for China to 7.75%, down from 8%. The Organisation for Economic Co-operation and Development also trimmed its expectations to 7.8% from 8%. Chinese leaders made statements in May they will tolerate a slower, but more ecological friendly expansion, boosting concerns for commodities demand. Concerns about the Asian economy slowing down have pressured copper prices as the metal is widely used in the industrial production. On the Comex division of the New York Mercantile Exchange copper lost 2.1% last week, marking a fifth straight weekly decline.