Thursday, 10 September 2015 16:55
LONDON: Copper prices hit a seven-week high on Thursday as fund buying fuelled the uptrend, but gains are expected to be capped by nervousness ahead of a Federal Reserve meeting next week and fears of a hard landing in top consumer China.
Benchmark copper rose 1.1 percent to $ 5,424 a tonne by 0944 GMT, from $ 5,365 at the close on Wednesday.
The metal used in power and construction earlier hit $ 5,435.
The red metal has risen about 10 percent since hitting a six-year low of $ 4,855 on Aug. 24, mostly on the back of short-covering by funds known as commodity trading advisors, which trade using buy or sell signals from mathematical models.
“We think some of the funds have flipped round to long positions,” said David Wilson, analyst at Citi. “People are waiting for the outcome of the Fed meeting on September 17.”
The US Federal Reserve is expected to keep interest rates steady after its meeting next week, but many see a rate increase before the year ends.
Higher US rates would reinforce dollar strength, which means commodities priced in the US currency are likely to remain under pressure.
Also on the agenda is a deluge of August economic data from China including industrial production and investment, both vital indicators, that could reinforce negative sentiment in industrial metals markets.
However, the market welcomed news that China would boost infrastructure spending and speed up reform of its tax system to support the economy.
“This could help to restore copper demand growth and continue to support the recovery in copper prices,” mining analysts SP Angel said in a note.
Three-month aluminium was up at $ 1,636 from $ 1,630, zinc at $ 1,829 from $ 1,818 at Wednesday’s close and tin at $ 15,200 from $ 14,950. Lead rose to a one-week high of $ 1,736.50 and was last at $ 1,732 from $ 1,718.
Traders said the emergence of a large position holding between 40 and 50 percent of warrants and cash contracts could mean a tighter market ahead.
That perception is reinforced by falling stocks of lead in LME-approved warehouses, which at 168,750 tonnes have tumbled more than 30 percent since late July.
Nickel jumped 3.5 percent to hit a three-week high of $ 10,465 on short-covering. The stainless steel ingredient was last at $ 10,445 from $ 10,100.
