Optimism about the economy showed through in the commodities markets yesterday as investors sent prices for gold, oil and grains
higher on the belief that demand for basic materials will rebound. Gold for August delivery settled at $982.30 (U.S.) in New York, up $16.70.


CLOSING PRICES (SPOT)

Gold US$/troy ounce 980.35 16.93

Silver US$/troy ounce 15.87 0.51

Copper US$/lb 2.27 0.05

Lead US$/lb 0.75 0.03

Zinc US$/lb 0.70 0.02

Aluminum US$/lb 0.70 0.04

Nickel US$/lb 6.63 0.23

Oil West Texas US$/bbl 69.39 3.27

Nat Gas Henry Hub US$ mmbtu 3.58 -0.23

Nat.Gas AECO C C$/gigajoule 2.96 -0.20

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Copper firms, but gains seen unsustainable

LONDON - Copper steadied on Friday, supported by stronger economic data, but analysts say current prices are unlikely to be sustained as fundamentals are weak.

Benchmark copper on the London Metal Exchange was at $5,020 (U.S.) a tonne at 1016 GMT from $5,025 at the close Thursday. The metal used in power and construction hit a 7-1/2 month high of $5,145 on Tuesday and is up about 6 per cent so far this week.

The trigger for this week's gains have been stronger economic data, especially surveys on manufacturing in China, the world's largest consumer of industrial metals.

Reinforcing positive sentiment was data from the United States showing a fall in weekly jobless claims.

"Although the market has been supported by positive sentiment, these kinds of price levels are unsustainable," said Eugen Weinberg, commodities analyst at Commerzbank.

"At current levels, the purchases from (China's) Strategic Reserves Bureau are going to disappear."

Mr. Weinberg added that the purchases from China have been the main reason for the recent rise in copper prices, and that real underlying demand is still quite weak.

However, copper garnered support on Friday from inventory draws. In LME warehouses they fell 3,225 tonnes to 299,975 tonnes, the lowest since early December, though that was offset to an extent by a rise in Shanghai.

Traders expect activity to be subdued ahead of monthly jobs data from the United States, due at 1230 GMT.

Aluminum rose to $1,611 a tonne, the highest since early January. It was last at $1,590 from $1,564.5 at the close on Thursday. The metal used in transport and packaging is up about 15 per cent since late May.

Much of the gain has been because of economic recovery hopes, but two days of stock draws this week have also helped fuel the price rise.

"This rally has taken prices ahead of the fundamentals and we are looking for prices to pull back in the weeks ahead. Some metals look more vulnerable than others though," Barclays Capital said in a note.

"Aluminum and nickel stand out as having the biggest downside risks given the potential for restarted production in China and huge inventory overhang."

Latest data showed stocks of aluminium in LME warehouses - up 2,875 tonnes to 4.24 million tonnes - could be resuming their uptrend.

Tin touched $15,100 a tonne, the highest since November 10 and was last at $14,500, down from $14,700.

The market in recent weeks has fretted about a potential squeeze on stocks in LME warehouses because of a dominant position controlling more than 90 per cent of available stocks.

But that dominant position has been reduced to between 80 and 90 per cent and that is reflected in the lower premium - $168 a tonne - for cash material over the three-month contract.

The premium in recent weeks has been consistently above $200 a tonne.

Also rising tin stocks in LME warehouses - up 255 tonnes at 15,475 tonnes, the highest since August 2007 - show supplies may note be a problem.

Zinc was at $1,570 from $1,575 on Thursday, lead at $1,640 from $1,665 and nickel at $14,600 from $14,700.