Copper futures fluctuate on Bernanke comments, U.S. housing data

Copper fluctuated on Wednesday but traded mostly higher after comments by Federal Reserve Chairman Ben Bernanke on Tuesday implied the central bank will maintain its stimulus in the near-term, boosting raw materials demand prospects. Gains however remained in check on expectations the National Association of Realtors may report U.S. existing home sales fell in October, indicating less consumption of the metal used as a conductor and building material.

On the Comex division of the New York Mercantile Exchange, copper futures for settlement in December traded at $3.161 per pound by 10:19 GMT, up 0.10% on the day. Prices shifted in a days range between $3.180 and $3.154 a pound. The metal rose by nearly 0.8% on Tuesday and further trimmed its weekly decline to little over 0.3% on Wednesday. The contract plunged to 3-1/2-month low of $3.124 a pound on Monday.

Copper drew support after Federal Reserve Chairman Ben Bernanke said yesterday the central bank will maintain its aggressive monetary policy for as long as needed and will commence scaling back its bond purchases once it is assured the labor market recovery is robust and will continue.

Bernanke also said the Federal Reserve will probably keep down its target interest rate even after bringing its quantitative easing program to an end and most likely after the U.S. unemployment rate falls below 6.5%.

“The target for the federal funds rate is likely to remain near zero for a considerable time after the asset purchases end, perhaps well after the jobless rate breaches the Fed’s 6.5 percent threshold.”

Bernanke’s comments came after President Barack Obama’s nominee for next Fed chief Janet Yellen said she doesn’t see evidence at this point that the current policy is inflating assets bubbles, further curbing speculations for an earlier-than-expected tapering of the stimulus.

In her prepared comments prior to her last week’s Senate hearing, Yellen called last month’s 7.3% unemployment rate too high, noting the economy and labor market were performing short of their potential, while inflation remained well below Fed’s 2% target and provided room for easy money supply.

Chae Un Soo, a metals trader at Korea Exchange Bank Futures Co. in Seoul, commented for Bloomberg: “Bernanke’s comment helped boost copper. Investors will watch for comments from an industry conference in Shanghai today and China’s manufacturing data tomorrow.”

China, U.S. data

A preliminary private report is expected to show on Thursday that manufacturing activity in the metals top consumer, China, eased in November from a month earlier, but remained in the expansion zone. Chinas HSBC Manufacturing PMI is projected to have inched down to 50.8 in November from Octobers final reading of 50.9 but remained firmly above the neutral level.

The metal was pressured on Monday after the National Association of Home Builders reported that its NAHB/Wells Fargo Housing Market Index remained unchanged at 54 in November after October’s reading received a downward revision. The reading mismatched an expected rise to 55.0 according to a Bloomberg survey, curbing the industrial metal’s demand prospects.

Data also showed that construction output in the Euro zone contracted by 1.3% in September after rising by 0.5% a month earlier. Year-on-year, production fell by 0.2% after declining by 4.7% in August.

Also fanning negative sentiment, a report by the National Association of Realtors may show later today that the number of existing homes sold in the U.S. in October fell to 5.16 million in October from 5.29 million a month earlier.