Copper rises on U.S. data, budget concern weighs

Copper rose on Thursday following upbeat housing data throughout the week and ahead of the release of Augusts Pending Home Sales and the final U.S. Q2 Gross Domestic Product reading. Gains however remained limited on concern over a government shutdown if lawmakers fail to pass the U.S. budget and prospects for QE tapering by the end of the year.

On the Comex division of the New York Mercantile Exchange, copper futures for delivery in December rose by 0.79% to $3.298 per pound at 8:43 GMT. Prices held in range between days high and low of $3.303 and $3.261 per pound respectively. The industrial metal rose by 0.3% on Wednesday and trimmed its weekly decline to less than 0.2% after Thursdays gains.

Copper drew support after data showed yesterday that new home sales in the U.S. rose by 7.9% to 421 000 on annual basis, beating analysts expectations for a rise to 420 000. July’s reading was revised downward to 0.390 million new homes sold from an initially estimated 0.394 million. According to a separate report, U.S. Durable Goods Orders advanced 0.1% in August, beating expectations for a 0.1% decline. July’s reading received a downward revision to a 8.1% contraction after the initial estimate of -7.3%.

On Tuesday, data showed that U.S. home prices rose in July. Year-on-year, the S&P/Case-Shiller Composite-20 Home Price Index jumped 12.39% from a year earlier after adding 12.07% in the preceding period, almost matching analysts’ expectations. At the same time, the U.S. Federal Housing Finance Agency reported that the U.S. House Price Index rose by 1.0% in July, surpassing analysts’ projections for a surge by 0.9% after advancing 0.7% in June.

On Thursday, U.S. Pending Home Sales may have declined by 1% in August, according to analysts expectations. In July, sales fell by 1.3%. A separate report however may show that the U.S. economy grew in the second quarter more than previously estimated. The final reading of the Q2 Gross Domestic Product is expected to show a 2.6% expansion from the previous year after the preliminary revised reading marked a 2.5% growth rate.

Gains however remained capped on concern over a stall in the negotiations over the U.S. budget. Lawmakers are in a conflict over whether to stop funding the health-care overhaul started in 2010, known as Obamacare. If the budget doesnt pass before the beginning of the next fiscal year on October 1, this could lead to a government shutdown.

Despite the global economic recovery signs however, copper supply is expected to exceed demand by the end of the year. The International Copper Study Group said yesterday that global demand of refined copper surpassed production in June by 132 000 metric tons, amid multi-month high consumption in China. However, Societe Generale SA reported earlier this month that supply will exceed demand this year by 150 000 tons and extend to 620 000 tons in 2014.

Gayle Berry, an analyst at Barclays Plc in London, said for Bloomberg: “When you look at the micro fundamentals for copper, there is more to worry about. You are looking at a market moving into surplus toward the end of the year.”