LONDON: Copper and other base metal prices rebounded on Thursday as the dollar weakened, forcing speculators to scramble to buy back their bearish positions.
Three-month copper on the London Metal Exchange gained 0.7% to $7,729 a tonne by 1615 GMT after earlier trading in the red following three sessions of losses.
The buying was largely based on technical levels because the short-term trend in copper had become bullish, said Gianclaudio Torlizzi, partner at consultancy T-Commodity in Milan.
A trader said the turnaround in the market was mostly driven by computer-driven speculative funds that use algorithms as the market broke above pre-set buying levels.
The rally was set off by the dollar index, which extended losses after US data showed jobless claims rose.
A weaker dollar makes commodities priced in the US currency cheaper for buyers using other currencies and usually boosts commodity markets.
LME copper has lost nearly 30% since hitting a record high of $10,845 a tonne in March, but managed to bounce from 20-month lows touched on July 15.
The rally, however, was only a temporary bounce within a wider bear market, said Tom Price, head of commodities strategy at Liberum.
The main drivers of industrial metals were still pointing to weaker prices, including a slowdown in top metals consumer China, he added.
“China has given up on its 5.5% GDP growth target and that tells me that any sort of stimulus before the end of the year is just going to support activity, rather than drive it to higher levels,” Price said.
LME zinc was the top gainer, jumping 5.5% to $3,457, the strongest since June 24, on worries about supply as smelters curb activity amid higher power prices and as inventories drop.
Major zinc producer Glencore on Thursday warned about the market while zinc inventories have nearly halved over the past three months.
“On the supply side, the current energy supply and price environment poses a significant threat,” Glencore said in an earnings statement.
LME aluminium gained 1.2% to $2,407 a tonne, lead advanced 0.9% to $2,043, and tin rose 0.9% to $24,470, but nickel eased 0.5% to $22,230.