Thursday, 03 September 2015 17:15
LONDON: Copper and other base metals gained on Thursday as bearish investors closed out positions amid a stock market recovery, but some were preparing a renewed attack on the downside.
Global shares rose, lifted by the strong rally on Wall Street the previous day and ahead of a European Central Bank meeting that some expect will raise the prospect of more quantitative easing.
“There’s definitely less of an extreme sense of volatility in the broader macro sense so it’s understandable that some investors have covered their shorts, taken profit on their positions,” said Nicholas Snowdon, metals analyst at Standard Chartered.
“But there’s no doubt that with prices of metals rising, they’re offering renewed entry points for new short positions.
There’s pretty significant downside for most of the metals, but particularly for zinc, nickel and aluminium.”
Three-month copper on the London Metal Exchange had climbed 2.2 percent to $ 5,232 a tonne by 1002 GMT after gaining 1 percent on Wednesday.
Prices have found a floor above $ 5,000, having plumbed six-year lows early last week at $ 4,855 a tonne. Sentiment has been tainted by sputtering China growth and still ample supply.
Standard Chartered forecasts copper to average $ 4,900 a tonne in the fourth quarter. The Shanghai Futures Exchange is closed for two days as China celebrates the anniversary of the end of World War Two.
Trading will resume on Monday. A flood of data from China in coming weeks is likely to point to further weakness in the world’s second-largest economy.
“Conditions in China from a metals perspective are deteriorating, particularly from a downstream perspective, where you continue to see big builds of inventories of fabricated and semi fabricated products,” Snowdon added.
Other investors were more optimistic, however, as other signals pointed to better physical demand from China, such as premiums for bonded copper that have held around the $ 120 mark for the past week, the highest in more than a year.
“The real grounds to a recovery are in play. China can still lower its rates if it needs to, so there should be no real reason for commodity markets to be this low,” said Jonathan Barratt, chief investment officer at Sydney’s Ayers Alliance.
Nickel climbed 2.6 percent to $ 10,040 a tonne, shrugging off news that Indonesia was still considering whether to allow firms with smelters to export ore as part of a package of incentives intended to spur growth in the sector.
Aluminium added 1.4 percent to $ 1,622 a tonne and zinc rose 0.7 percent to $ 1,830.50.
