Base metals all posted mediocre gains on Friday. Copper climbed 2.72 cents to close at $2.4082/lb. Nickel added nearly 4 cents to finish at $7.2507/lb. Zinc gained more than 3 pennies, ending at $0.7182/lb. Aluminum tacked on more almost 1 cent, closing at $0.7589/lb., while lead moved to $0.7533/lb., up almost three-and-a-half pennies from the previous session.

Copper closed at its highest price this year on Friday, also boosted by the unexpected jump in U.S. home construction data.

The big boost in U.S. housing permits coupled with weakness in the U.S. dollar and a strong expansion in China’s economy combined to drive the price of copper up nearly 10% on the week, said Michael Pento, chief economist with Delta Global Advisors.

“An upper-cut, a left hook, and a body blow … what a three-punch combination to power copper up through its $2.40 resistance level,” he said.

Despite the stronger tone this week, analysts still remain somewhat skeptical about further upside price potential.

“Is it all built on a foundation of sand?” asked Calyon analyst Robin Bhar. “[Copper] will struggle to sustain these prices over the coming couple of months.”

Meanwhile, copper stocks at LME warehouses rose 3,275 metric tons to 264,150 tons from levels around 500,000 tons in early April.

Concerns about nearby supplies have arisen because LME data for several days now has shown a dominant position controlling between 50% and 80% of LME stocks.

The worry reflected the premium, or backwardation, of about $10 a metric ton for LME cash copper over the three-month contract. This compares to a contango of $14.50 on July 8.

“The backwardation [isn't] a sign that consumption is strong. There are genuine concerns about long-term demand,” a trader said. “Backwardation is a function of nearby tightness in the market, short positions being rolled forward.”

Source: Base Metals in the Black