Growth spurs funds to turn bullish on copper

NEW YORK: Hedge funds increased bullish commodity bets for the fourth straight week and became the most bullish on copper since December on signs of faster growth in the United States and China.

Speculators boosted net-long positions across 18 US futures and options in the week ended February 5 by 11% to 885,655 contracts, marking the longest stretch of gains in more than six months, US Commodity Futures Trading Commission data show. Traders lifted bullish wagers on everything from copper to platinum, corn and soybeans.

A gauge of prices for 18 commodities most tied to economic growth, including burlap and steel, reached the highest since September 2011 at the end of January as global manufacturing gained. In China, the world’s top consumer of cotton, copper and pork, trade grew more than analysts forecast, the government said on February 8. Service industries in the US, the biggest user of crude oil and corn, expanded more than analysts predicted in January, a private survey showed February 5.


“With China and the US registering growth, the economically sensitive commodities will do well,” said Michael Strauss, who helps oversee about $26 billion as chief investment strategist at Commonfund in Wilton, Connecticut. “The global environment is favourable for commodities.”

The Standard & Poor’s GSCI gauge of 24 raw materials traded within 0.1% of a four-month high on February 8, before ending the week little changed. The commodity gauge is up 4.4% in 2013. The MSCI All-Country World Index of equities climbed 4.6%, while the dollar rose 0.6% against a basket of six trading partners. Treasuries fell 0.8%, a Bank of America Corp. index shows. The GSCI was little changed on Monday.

Exports from China advanced 25% in January from a year earlier and imports rose 29%, according to government data. Passenger-vehicle sales surged 49% to a monthly record, a state-backed group said on February 7. The average automobile contains about 50 pounds of copper and 4 grams (0.13 troy ounce) of palladium, platinum or rhodium, say the International Copper Study Group and Johnson Matthey.

The US non-manufacturing index for January was at 55.2, compared with analyst estimates for a reading of 55, the Institute for Supply Management said. Readings above 50 signal expansion. The group’s employment gauge was the strongest in seven years.

The JoC-ECRI Industrial Price Index, which tracks 18 industrial commodities from plywood to cattle hides, is up 10% from a three-month low in November. The measure, begun in 1985 by Geoffrey Moore, founder of the Economic Cycle Research Institute and a mentor to former Federal Reserve Chairman Alan Greenspan, can be used as a leading indicator for global production. Nine components, including ethylene and red oak, aren’t traded on US exchanges and are less influenced by investor sentiment. The debt crisis in Europe will be a drag on world economies and limit commodities demand, said Stanley Crouch, who helps oversee $2 billion of assets as chief investment officer at New York-based Aegis Capital.

European Central Bank President Mario Draghi has said the risks to the region’s economy remain to the downside.