By Shihoko Goto — Exclusive to Copper Investing News
Copper has gained ground this week on renewed expectations for stronger demand w or ldwide. Worries about Europe have lessened somewhat as the E uropean Central Bank indicated its commitment to ensuring financial stability across the continent; it is prepared to intervene in debt markets to support Spain if need be.
Investors are more confident about Chinese appetite for the red metal, particularly because the China Association of Automobile Manufacturers reported that passenger car sales rose 4.5 percent in March to 1.4 million units. In the United States, expectations of continued easy monetary policy and a steady stream of positive economic data are buoying investors' bullish outlook for copper. On Wednesday, Federal Reserve Vice Chair Janet Yellen said at a New York University event that “I consider a highly accommodative policy stance to be appropriate in present circumstances.” She added “[w]e know that recoveries from financial crises are commonly prolonged, and I remain concerned that the headwinds that have been restraining the recovery could lead to a longer period of sluggish growth and high unemployment than is embodied in the consensus forecasts.” The Bank of Japan is also expected to do more to bolster the economy. The central bank's governor, Masaaki Shirakawa, said that “the BOJ will pursue powerful easing” as political pressure grows for the BOJ to do more to fight deflation. Turning to Europe, European Central Bank executive board member Benoit Coeure said that the bank may resume buying bonds to lower Spain's borrowing costs amid growing concern about the effects of Spain's financial woes. On the demand side, CME Group reported that COMEX copper futures set a new volume record of 127,276 contracts on Tuesday. The previous record of 117,165 contracts was set on February 21. Barclays reported that North American demand for base metals in general has been strong so far this year. "Given our economists anticipate the US recovery to be sustained and indeed accelerate in the second half of this year (3% GDP in H2 versus 2.5% in H1), a case for sustained positive metals demand trends can be made. While China clearly dominates demand dynamics for the base complex, a robust U.S. representing close to 10% of global demand for each metal cannot be ignored as a counterbalancing or even supplementary effect,” Barclays reported.