Copper extends gains on U.S. industrial production, QE outlook

Copper rose more than 1% on Monday amid overall upbeat U.S. data and after one of the potential candidates for next Fed chairman and supporters of tighter monetary policy dropped out of the race. Receding fears over an escalating conflict in Syria stoked demand for riskier assets.

On the Comex division of the New York Mercantile Exchange, copper futures for delivery in December rose by 0.96% to $3.235 per pound at 14:20 GMT. Prices held in range between days high and low of $3.271 and $3.199 per pound respectively. The industrial metal rose by 0.5% on Friday but still settled the week 1.2% lower after advancing 0.7% in the preceding one.

Copper fluctuated on Monday but extended its gains in the late European and early American sessions as data showed that U.S. industrial production in August has matched analysts projections for a 0.4% expansion, compared to remaining flat in July. The report also showed that capacity utilization, which measures of how fully firms are using their resources also met economists expectations and rose by 0.2% to 77.8%.

Manufacturing production, a component of the broader indicator, rose by 0.7% in August and reversed Julys 0.4% drop, mainly due to a 5.2% rebound in automobile assembly, which declined 4.5% in July.

The industrial metal rose earlier in the day amid a broadly weaker dollar after Lawrence Summers, Treasury secretary under President Bill Clinton and former top aide to President Barack Obama, withdrew from consideration to succeed current Federal Reserve Chairman Ben Bernanke. This boosted speculation that the end of the program might be deferred as Summers was expected to tighten Fed policy more than his potential opponent Fed Vice Chairman Janet Yellen.

The dollar index, which measures the greenbacks performance against six major counterparts, traded at 81.29 at 14:39 GMT, down 0.47% on the day. The December contract fell to a three-week low of 81.14, while days high remained at 81.38. The U.S. currency gauge marked a minor daily decline on Friday and settled the week 0.6% lower after adding 0.95% in the previous two five-day periods.

Market players eyed the upcoming Federal Open Market Committee meeting, which is scheduled for September 17-18. According to a Bloomberg survey conducted on September 6, the central bank will reduce its monthly purchases of Treasuries to $35 billion from $45 billion and keep mortgage-bond buying unchanged at $40 billion. Credit Suisse analysts expected a $20 billion reduction.

“A series of recent economic data improvements points in this direction and the weaker-than-expected August labour market report is unlikely to keep the Fed from proceeding with slowly winding down its asset purchases,” the investment bank said.