Copper rebounded on Tuesday, marking a large intra-day gain as Peoples Bank of China representatives reassured investors the recent cash squeeze in the economy will be handled and liquidity will be kept at a supportive level for growth.
On the Comex division of the New York Mercantile Exchange, copper futures for September delivery traded at $3.071 a pound at 11:43 GMT, marking a 1.40% daily gain. Prices ranged between days high and low at $2.986 and $3.073 a pound respectively. The industrial metal fell 3.14% last week as the stronger dollar weighed on all dollar-priced commodities. Prices were further pressured as negative news from China spurred concern over global copper demand as the Asian country accounts for 40% of global consumption.
Copper fell 1.4% earlier during the session to $2.986 a pound, the lowest level since July 20, 2010 amid growing concern over the cash squeeze in China. However, prices rebounded as Ling Tao, deputy director of the Shanghai branch of the Peoples Bank of China, said the central banks will guide interest rates to a “reasonable range”, which eased concern on the metals appeal. Tao also said interbank liquidity is overall under control and ample. He added that the Peoples Bank of China will keep monitoring the economy and will keep making efforts into stabilization.
The Asian countrys growth projection was further revised down. Goldman Sachs became the latest bank to trim the Asian country’s GDP projection amid tighter financial conditions and reforms. China’s GDP forecast for 2013 was cut to 7.4%, down from 7.8% and below the official target of 7.5%. GDP growth for the second quarter was also trimmed, standing at 7.5%, compared to the previous expectation of 7.8%. China’s economy is also expected to expand less in 2014 than anticipated. The 2014 forecast was revised down to 7.7%, down from 8.4%.
Copper fell throughout most of last week, pressured down by the stronger greenback after Ben Bernanke said Fed might scale back its monetary stimulus program during the second half of the year and end it by mid-2014. According to Bernanke, Fed’s moves are tied to what happens in the economy and the central bank has no fixed plan, but sentiment points at reducing bond purchases. Bernanke said that if the economy continues to improve in line with Fed’s projections, it would be “appropriate to moderate the monthly pace of purchases later this year”, and end the program as the unemployment rate drops to 7%, which the central bank expects to happen around mid-2014.
However, copper, like all other dollar-priced commodities that benefit from a weaker dollar, found support by recent comments of Fed presidents. Narayana Kocherlakota, president of the Federal Reserve Bank of Minneapolis, said on Monday that the central bank was committed to continuing its asset purchasing program until the U.S. jobless rate shrinks further. His statement was also backed by Dallas Fed President, Richard Fisher, who said the recent concern and speculations about a premature stimulus deceleration was overdone.