U.S. copper futures rumbled to a new record in thin dealings on Tuesday, propped up by sharp falls in the dollar, a strong Chinese currency and threats of supply disruptions, analysts said.
The benchmark fourth-month copper contract on the Comex division of the New York Mercantile Exchange, March, settled up 1.1 per cent, or 4.8 cents (U.S.), at $4.3280 a pound.
The metal, used in power and construction and regarded as a better economic indicator than most commodities, hit a record $4.3350 on the Comex despite a drop in the latest readings for U.S. consumer confidence and home prices.
The copper futures market on the London Metal Exchange remained shuttered for a second straight day for post-Christmas holidays. In Asia, Shanghai copper futures' benchmark third-month contract closed up 290 yuan ($43.76) at 69,000 yuan a tonne.
Despite its record price on Comex, copper's traded volume on the exchange was just around 11,700 lots, or about a quarter of the 30-day average, by 2:30 p.m. ET, Thomson Reuters' preliminary data showed.
"We're making highs on extremely thin volume," said Sean McGillivray, head of asset allocation for Great Pacific Wealth Management in Oregon.
He said it was hard to seriously consider the highs notched by copper because they need to be "validated with volume."
Trading in copper and almost every other commodity and financial market dwindled over the past fortnight as traders and investors took off for seasonal holidays.
Even so, some argue that the rally in copper is fundamentally supported and unlikely to lose steam soon.
"I see a possible top of $4.40 to $4.45 next week," Zachary Oxman, managing director at Trendmax Futures in Encinitas, Calif., said in his projection for March copper.
"This is a market riding on all the inflation promised by the Fed and the inexorable buying likely to come out of China, despite what China does to its interest rates."
Copper has risen with a broad number of other commodities since September, coinciding with a wider rally on Wall Street and world equities, after the Federal Reserve came up with a $600-billion bond buying program to stimulate U.S. growth.
For the year, copper is up nearly 30 per cent on the 19-commodity Reuters Jefferies CRB index. The CRB is poised to finish the year up more than 15 per cent.
Technically, Comex copper was expected to briefly enter a range of $4.40 to $4.50 a pound over the next four weeks and then retrace to $4.045, according to Reuters technical analyst Wang Tao.
China – the No. 1 consumer of base metals such as copper and the largest economy after the United States – dampened somewhat the sentiment in commodities at the weekend with its second interest rate hike in just over two months.
The People's Bank of China raised its main one-year lending and deposit rates by 25 basis points in an attempt to temper inflation.
Like Trendmax's Oxman, McGillivray at Great Pacific said investors were likely to find Beijing's inflation battle "credible," unless it ratchets interest rates even higher.
Other factors underpinning copper's strength in the near term include the closing of Chile's Patache port terminal – which has blocked exports by No. 3 copper miner Collahuasi – and a supply deficit expected in 2011.