By Chris Kelly and Susan Thomas
NEW YORK/LONDON | Fri Aug 31, 2012 2:10pm EDT
(Reuters) – Copper rose on Friday to end August with a monthly gain, after Federal Reserve Chairman Ben Bernanke said high unemployment is a “grave concern”, leaving investors hopeful for another round of government bond buying, or quantitative easing, or QE, from the U.S. central bank.
Copper fell to a 10-day low early but recovered with other financial markets after Bernanke said the Fed would act as needed to strengthen the economy. While he did not say a move was imminent, investors were hopeful.
“The hope of another round of QE from the Fed is not off the table, it’s just kicked down the road, so that hope is still alive and acting as a strong bid under the market,” said Adam Sarhan, chief executive of Sarhan Capital.
COMEX copper for December delivery rose 1.00 cent to settle at $3.4570 per lb, after dealing between $3.4075 and $3.4680.
For the month, the contract was up nearly 1 percent.
On the London Metal Exchange (LME), benchmark copper initially fell to a session low of $7,498 a tonne, its lowest since August 21, before ending up $40 at $7,610.
The metal is still down around 13 percent from its 2012 peak hit in February at $8,765, and has been trapped in a range this month between $7,300 and $7,700 amid low trading volumes.
With the Fed chairman’s speech in the rear view mirror, the market will watch whether the European Central Bank announces a clear plan to tackle the euro zone debt crisis at its policy meeting next week.
“The noose is around Draghi’s neck, not around the Fed’s neck right now,” Sarhan said, referring to ECB President Mario Draghi.
“The reality is that the U.S. is not yet in a position where it needs QE3 right now … however, Europe is. Bernanke made it abundantly clear that they’ll have a wait-and-see approach, and act if the data forces his hand. Right now, the data just hasn’t been bad enough,” he said.
Data Friday showed new orders for U.S. factory goods rose in July by the most since July 2011.
This reinforced a steady stream of positive economic data from the U.S. over the past week in areas such as consumer spending, housing, inflation and employment.
In Europe, Spain is negotiating with euro zone partners over conditions for aid to bring down its borrowing costs, though the country has not made a final decision to request a bailout, three euro zone sources said on Thursday.
The focus moved to the weekend, when China will release its official manufacturing managers’ index (PMI). “A weak reading would increase the downside risks,” Credit Suisse said in a research note.
A Reuters survey showed the PMI may have eased to a nine-month low of 50 in August, which would support the case for fresh easing measures by the central bank.
In other news on Friday, copper production at Chile’s Codelco declined 6.4 percent in the first half from a year earlier to 767,000 tonnes, the miner said on Friday, but the world’s No. 1 copper producer said it still intends to produce around 1.7 million tonnes this year.
In other metals, LME tin, was untraded in rings but last bid at $19,350 per tonne versus Thursday’s closing price of $19,600. The metal slumped nearly 7 percent on the week — its biggest weekly drop in almost a year.
Indonesia’s largest tin miner PT Timah (TINS.JK) said on Wednesday it had re-started spot sales after a three-week stoppage.
That took the steam out of a rally that saw prices shoot up 13 percent last week, rising as high as $20,901 on news that more than 90 percent of Indonesian tin producers had stopped production.
“Tin is a very thin market at the best of times. The rally was looking stretched and then out came the fundamental news that was announced by PT Timah, and that was the trigger for the sharp sell-off,” BNP Paribas analyst Stephen Briggs said.
“When you get a piece of negative news, tin tends to drop like a stone because of the liquidity. It has begun to stabilize and I think the fundamentals are still pretty solid.”
(Additional reporting by Silvia Antonioli in London; Editing by Jane Baird, Keiron Henderson and David Gregorio)