Copper at five-week low on Fed stimulus outlook

Copper fell for a third day to a five-week low amid broad expectations that the Federal Reserve will pare its monetary easing program after the upcoming FOMC meeting on September 17-18. Losses remained limited on China demand outlook.

On the Comex division of the New York Mercantile Exchange, copper futures for delivery in December fell by 0.91% to $3.227 per pound at 8:30 GMT. Prices fell by 1.02% to a days low of $3.224 a pound, the weakest level since August 7, while days high was touched at $3.275 per pound. The industrial metal slipped 0.3% in the past couple of days and extended its weekly decline to 1% after Thursdays retreat.

Copper extended losses as the majority of market players expect policy makers to announce a long-awaited reduction of Fed’s monetary easing program at the upcoming FOMC meeting on September 17-18. According to a Bloomberg survey conducted last Friday, the central bank will trim its monetary stimulus by $10 billion after the meeting. Goldman Sachs analysts shared the same opinion.

Xiong Dabiao, an analyst at Minmetals Futures Co. in Shanghai, said for Bloomberg: “The market will remain volatile until the Fed decision comes next week. Since the odds are pretty fair that the Fed will taper off its stimulus, investors are hesitant to raise their bets on China’s recovery.”

Losses remained limited by recent upbeat data from China, but couldnt offset QE tapering speculations. Bank of America Merrill Lynch raised its growth forecast for the Chinese economy in 2013 to 7.7% from its previous estimate at 7.6%. This comes after data showed the country’s total exports rose by 7.2% last month, exceeding analysts’ expectations for a 5.5% surge. Imports increased by 7%, below projections, but still above July’s 5.1% rise. China’s trade surplus widened to $28.6 billion from $17.8 billion in July, surpassing expectations for a rise to $20.0 billion.

Chinas National Bureau of Statistics reported that consumer inflation rose by 2.6% and remained below the government’s target, leaving extra room for mini financial stimulus, which could provide ground for sustainable growth. China’s producer-price index fell by 1.6% in August after dropping 2.3% in July, marking the smallest decline in six months.

The Asian country’s industrial production surged by 10.4% in August, exceeding analysts’ projection for a 9.9% rise and the preceding month’s 9.7% expansion. Retail Sales surpassed both economists’ expectations and the previous month’s increase of 13.2% and increased by 13.4%.