Humeyra Pamuk

Thursday, September 17, 2009

LONDON — A weak U.S. dollar pushed copper higher on Thursday, and sent aluminum to a three-week high but gains were capped as rising inventories reflected weak demand.

Nickel, zinc and lead were at a one-week high, while gold prices rallied to their highest in 18 months as the euro hit a one-year high against the dollar, while European shares were up on renewed economic recovery hopes.

Copper for three months delivery on the London Metal Exchange rose to $6,441 (U.S.) a tonne by 0930 GMT, versus Wednesday's $6,415 a tonne.

“The dollar weakness is underpinning metal prices,” said analyst Robin Bhar at Calyon. “But people are still worried about the uncertainties in the economy and all the good news is in the prices,” he said.

Copper has more than doubled since the start of the year, driven by speculative buying, signs of improvement in the global economy and Chinese restocking – which recently ran out of steam.

This week's upbeat U.S. retail data and comments from U.S. Federal Reserve Chairman Ben Bernanke saying the U.S. recession is probably over buoyed copper, but was not enough to lift it from the $500 trading range it has been stuck in since early August.

“We've had a good run (with copper). For it to go any higher we have to see solid data showing recovery,” he said.

But the inventory data does not look promising. LME copper inventories rose 1,150 tonnes on Thursday to 324,375 tonnes, up by over a quarter since July. Early expectations were for weekly Shanghai copper stocks to be flat to slightly lower when data is released on Friday.

Some analysts say investment money is another factor that supports industrial metals, as commodities are increasingly seen as a diversifier and even a hedge against the inflationary risks posed by the billions of dollar injected in the global financial system by governments and central banks to boost growth.

“There was a feeling that people have missed the boat with the latest move in commodities,” said analyst Leon Westgate at Standard Bank.

Aluminum rose $21 to $1,948. Earlier prices rallied to $1,957, their highest since Aug. 24, despite big deliveries in the last few days that have pushed LME stockpiles to a fresh record high of 4.629 million tonnes.

“The stocks data has been irrelevant for a while now,” Mr. Westgate said, adding dollar weakness was driving metal prices higher Barclays Capital analyst Yingxi Yu said that much of the aluminum in LME storage remained locked up in financing deals and was not readily available to the market.

She also painted a relatively bullish picture for the metal in the nearer term as Chinese consumers had not yet restocked to the extent seen in copper.

Zinc gained to $1,965 a tonne, versus $1,937. Nickel rose to $17,750 from $17,250 while battery making material lead was firmer at $2,335 from $2,294 a tonne.

Tin was firmer at $14,700 a tonne from $14,600 a tonne.

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