Tuesday, 6 December 2016

Zinc, copper jump as US dollar falls


A slide in the US dollar and buying by computer-driven funds helped to push zinc, copper and other base metals higher, traders said, though some expected the move to be short lived with further declines likely before the end of the year.
Benchmark zinc on the London Metal Exchange surged 3.7 per cent to close at $US2,766 a tonne, bouncing from a 2.2 per cent loss on Friday.
Zinc is the best-performing LME metal, having surged 72 per cent this year, but has retreated about nine per cent from a nine-year peak of $US2,985 touched on November. 28.
"Technical dynamics are behind the moves. We are still seeing algos continuing to buy on the dips," said Gianclaudio Torlizzi, Partner at consultancy T-Commodity.
Mr Torlizzi was referring to algorithmic funds that use computer programmes to make trading decisions, often based on technical factors such as momentum.
Also supporting base metals was a fall in the US dollar index. A weaker US dollar makes commodities priced in the greenback cheaper for buyers using other currencies.
The US dollar dropped to its lowest in more than two weeks after Italy's rejection of constitutional reform in the country's referendum at the weekend.
"But we don't see any real trigger for a sustainable move higher (in metals). We expect the market to continue to consolidate lower into year-end, so every time the metals rally higher, we see it as an opportunity to sell," said Mr Torlizzi, who has targeted zinc to fall to about $US2,400.
Three-month LME copper climbed 3.3 per cent to end at $US5,950 a tonne, having last week hit $US6,045.50, its highest since June 2015.
Copper and other metals were supported by a private survey showing growth in China's services sector accelerated to a 16-month high in November.
"The failure of the metals rally to reverse itself immediately suggests that it is built on more than mere speculation," Barclays analyst Dane Davis said in a note.
"As long as Chinese demand remains healthy, the risk of a sudden and rapid reversal in the short term remains low."
LME nickel rose 1.6 per cent to finish at $US11,640 on the prospect of falling supply from the Philippines.
Third-quarter nickel ore production in the Philippines fell 16 per cent from a year earlier, government data showed on Monday, after the world's top supplier suspended some mines in a crackdown on environmental violations.
Stockpiles of nickel ore for China's vast stainless steel-making industry have been falling. Stocks at Chinese ports have turned sharply lower in the past month, declining by about 20,000 tonnes to around 1.24 million tonnes, their lowest since July, the latest data shows.
LME aluminium closed up 1.2 per cent at $US1,734.50, lead rose 2.3 per cent to $US2,321 and tin added 0.7 per cent to $US21,175.
Originally published as Zinc, copper jump as US dollar falls


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