Base Metals Come Roaring Back, Considerable Short Covering Seen
Jul 10th, 2008 | By Doug Casey | Category: Gold MarketThe base metals all went on a tear on Wednesday. Copper was down from the pre-dawn hours to the first part of the New York morning, touching $3.74, but then rallied sharply to finish just below its intraday high at $3.8065/lb., up nearly 3 cents.
Nickel noodled around little changed until the late morning, then it too took off, climbing to close near its intraday high at $9.6245/lb., up 42¾ cents. Zinc was up from the pre-dawn hours straight through, ending at its high of $0.8301/lb., up 4¼ cents. Aluminum rebounded well, adding a penny and two-thirds, to $1.4148/lb., while lead also turned in a banner day, gaining just over 6 cents, to $0.789/lb.
Copper was up for the first time in four sessions, as analysts cited the declining dollar, and concomitant inflation fears, as a catalyst. The metal also got a boost after union leaders said that workers at Freeport McMoRan’s Verde copper pit in Peru plan to strike starting July 16.
But Catherine Virga, an analyst with CPM Group in New York, played that down, saying that, “In Peru, they are normally not long-running issues. As long as it’s just them, I don’t think it will be something sustainable, especially with continued increases in stock levels on the LME.”
Copper advanced despite supply increases, as inventories monitored by the LME shot up by 1.8%, to 124,325 metric tons. It was the biggest increase since May 21 and put levels at their high point since May 30.
Meanwhile, lead and zinc were making powerful up moves as short sellers began covering their positions after recent declines, traders said.
“[Lead] stocks appear to be levelling out after four months of strong gains,” said analyst David Thurtell of BNP Paribas (BNP).
“Cancelled warrants have jumped in recent days, which suggests that the low prices of recent weeks has sparked some significant offtake,” he added. Lead prices have dropped more than 50% since March as inventories have more than doubled, due to a slowdown in demand.
Regarding aluminum, which has been lingering near its alltime high, analyst Daniel Smith of Standard Chartered said that, “There’s a lot of metal around on the LME and off-warrant, and premiums are generally drifting lower.”
“It’s difficult to create a particularly bullish scenario for aluminium,” in his opinion.
Source: Base Metals Come Roaring Back, Considerable Short Covering Seen
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