Copper gains boosted by better than expected U.S. economic data

Copper yesterday settled up by 1.4% at 712.45 boosted by better-than-expected U.S. economic data and signs that a deal to raise the U.S. debt ceiling is close, which eased worries of a default and weakened. Copper inventories in warehouses monitored by the Shanghai Futures Exchange fell 15.9 % from last Friday, the exchange said. Speculators have amassed their biggest short positions in U.S. copper futures in 10 months as China's economic recovery falls short of expectations and rising interest rates slow growth in other countries, weakening demand for the metal.

Demand for the metal has been affected by the lackluster economic recovery, particularly in China. Unlike in previous slowdowns, the Chinese government has not implemented substantial infrastructure or property spending, depriving copper and other metals of a safety net. Moreover, copper inventories in the London Metal Exchange nearly doubled since mid-April, indicating weakness in demand on a global scale. This increase in supply relative to demand is evident in the wide contango spread between copper's spot price and three-month futures on the LME, the widest since 1994. Also, the global refined copper market registered a surplus in March, the International Copper Study Group said.

Technically market is under short covering as the market has witnessed a drop in open interest by -9.45% to settle at 6543 while prices are up 9.85 rupees, now Copper is getting support at 706.4 and below same could see a test of 700.2 levels, and resistance is now likely to be seen at 716.4, a move above could see prices testing 720.2.