Copper futures fluctuate as Fed stimulus outlook, rising inventories offset supportive Iran accord

Copper swung between gains and losses on Monday as investors weighed rising global supplies and speculations over an earlier-than-expected Fed stimulus tapering against a groundbreaking diplomatic breakthrough between Iran and six world powers that is expected to boost global growth. Investors eyed upcoming housing and consumer sentiment data from the U.S. for a hint of when the Federal Reserve may begin paring its monthly bond purchases.

On the Comex division of the New York Mercantile Exchange, copper futures for settlement in March fell by 0.16% to $3.213 per pound by 13:13 GMT. Prices shifted in a range between days high and low of $3.270 and $3.206. The industrial metal added 1% on Friday and settled the week 1.5% higher after losing 3.9% in the preceding two five-day periods.

Copper drew support after Iranian envoys and their counterparts from the five permanent members of the U.N. Security Council and Germany managed to reach an accord on curbing the Islamic republics nuclear program in exchange for a relief from tough sanctions, boosting the prospects for global economic growth.

The temporary deal grants Iran access to $4.2 billion in oil revenue frozen in foreign banks and will provide $400 million in tuition payments to schools for Iranian students who study abroad. It will also give access to civilian aircraft parts and permit the trade in precious metals.

The current limitations to the country’s outbound shipments remain unchanged at around 1 million barrels per day. However, the European Union will remove a ban on insurance for tankers carrying Iranian oil, easing the trade between Iran and its six remaining customers.

In exchange for the partial lift of sanctions, Iran must improve its cooperation with United Nations monitors by granting nuclear inspectors access to its facilities, eliminate its inventories of uranium enriched to 20% and refrain from bringing online a heavy water reactor at Arak, which will provide the country with a second path to nuclear weapons by producing plutonium.

Fed stimulus outlook

Recent upbeat data from the U.S. and expectations for more positive readings this week boosted the U.S. dollar, which weighed on raw materials denominated in the greenback. Last week’s FOMC October meeting protocols revealed the Federal Reserve might begin trimming its quantitative easing program “in the coming months”, if the economic recovery moves in the desired direction. Fed minutes showed that policy makers “generally expected that the data would prove consistent with the committee’s outlook for ongoing improvement in labor market conditions and would thus warrant trimming the pace of purchases in coming months.”

Speculations for an earlier-than-projected quantitative easing deceleration were reinforced as U.S. retail sales jumped by the most since July last month while the Department of Labor reported on Thursday that the number of people who filed for unemployment assistance in the week ended November 16 decreased by 21 000 to reach 323 000, the lowest number since September.

The U.S. dollar index, which measures the greenback’s performance against a basket of six major peers, traded at 80.91 at 13:00 GMT, up 0.27% on the day. Prices shifted in a day’s range between 80.97 and 80.67. Strengthening of the dollar makes commodities priced in it more expensive for foreign currency holders and limits their appeal as an alternative investment.

Market players also awaited the release of key U.S. housing and consumer sentiment data later this week to gauge Fed’s tapering timetable. On Monday, the National Association of Realtors is expected to report that U.S. Pending Home Sales may have risen by 2.0% in October after declining by 5.6% in the previous month.

Data released on Tuesday may show that the number of building permits issued in September and October also advanced, followed by two consecutive gains in housing starts in the respective months. Housing prices are projected to have jumped in September with the S&P/Case-Shiller Composite-20 Home Price Index surging by 12.97% on annual basis, up from 12.82% a month earlier. Meanwhile, the Conference Board will likely report that consumer confidence rose to 72.1 in November following a steep drop to 71.2 in October.

On Wednesday, data by the Labor Department is expected to show that the number of people who filed for initial unemployment benefits rose to 330 000 in the week ended November 23, while durable goods orders probably fell by 1.7% in October. Business activity in Chicago likely slowed in November but remained firmly in the expansion zone, while the Thomson Reuters/University of Michigan Consumer Sentiment Index is projected to confirm the Conference Board’s improvement prediction, marking a surge to 73.1 from October’s 72.0

According to data by the U.S. Commodity Futures Trading Commission, short bets on Comex copper almost tripled to 24 067 futures and options contracts combined in the week ended November 19, the highest since August.

Statistics provided by the International Copper Study Group showed that the global copper market swung to a surplus of 21 000 tons in August after running at deficit for three straight months.