The base metals were mixed in undramatic trading on Wednesday. Copper sank below $3.30 in the pre-dawn hours, but then rallied through most of the rest of the day, finishing with a modest gain at $3.3507/lb., up more than 2¾ cents. Nickel came off its pre-dawn lows to trade essentially flat through the day, closing at $8.7636/lb., down 3 cents.

Zinc moved up, just coming off its intraday high to end at $0.7942/lb., up more than a half-cent. Aluminum’s slump continued, as it sank for most of the day, losing a penny to $1.1896/lb., while lead shot higher from the late pre-dawn hours straight through, adding 2¾ cents, to $0.8748/lb.

Copper edged higher as traders focused on ongoing demand in the emerging nations along with the possibility that the recent selloff may have been overdone.

Continued growth in consuming nations including China will buoy prices for copper, said Evy Hambro, manager of mining and gold funds at BlackRock Inc (BLK).

Investors were also buoyed by the larger-than-expected increase in factory orders for July. But the surprising performance of the US dollar still serves as a brake on any upward momentum.

“If the dollar keeps going up and this deflation idea takes hold, we’ll see prices continue to drift lower,” said Ron Goodis, of Equidex Brokerage Group in Closter, New Jersey. “The market is giving off signals that the downside could start to accelerate.”

And already the commodities selloff has begun claiming some high profile victims. New York-based investment firm Ospraie Management announced that it will close its biggest hedge fund after it lost almost 39% this year because of declines in commodity stocks. Ospraie said it will suspend all redemptions and sell all of the fund’s remaining positions to return money to its investors. Lehman Brothers also owns 20% of Ospraie.

The Ospraie Fund, which managed $2.8 billion in assets at the beginning of August, was undone by a “substantial sell-off in a number of our energy, mining and resource equity holdings,” the company said.

Dennis Gartman, editor of the Gartman Letter, termed the Ospraie situation a “sign of the times,” noting that, “So many people jumped on board the supposed never-ending commodity bull market … I’m sorry,” Gartman said “but, all bull markets come to an end.”

Yes, they do. But we doubt that this one has, quite yet, even if Jon Nadler concurs. “Speculators sold everything that even resembled a commodity” in the wake of the collapse of Ospriae,” said Nadler. “One also has to extrapolate that this failure is not going to be a ‘one-off’ event — not when considering the tens of billions that have been thrown at the commodities sector over the past several years.”

Source: Base metals little changed -  Rising dollar cramps demand.