Zinc and copper jump on buying, weaker dollar

LONDON — A slide in the dollar and buying by computer-driven funds helped to push zinc, copper and other base metals higher on Monday, 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 ( LME) surged 3.7% to close at $2,766 a ton, bouncing from a 2.2% loss on Friday.

Zinc is the best performing LME metal, having surged 72% this year, but has retreated about 9% from a nine-year peak of $2,985 touched on Nov. 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 in Milan.

He was referring to algorithmic funds that use computer programs to make trading decisions, often based on technical factors such as momentum.

Also supporting base metals was a fall in the dollar index. A weaker dollar makes commodities priced in the greenback cheaper for buyers using other currencies. The dollar dropped to its lowest in more than two weeks after Italy’s rejection of constitutional reform in a referendum last 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 yearend, so every time the metals rally higher, we see it as an opportunity to sell,” said Torlizzi, who has targeted zinc to fall to about $2,400.

Three- month LME copper climbed 3.3% to end at $5,950 a ton, having last week hit $6,045.50, 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% to finish at $11,640 on the prospect of falling supply from the Philippines.

Third-quarter nickel ore production in the Philippines fell 16% from a year earlier, government data showed on Monday, after the world’s top supplier suspended some mines in a crackdown on environmental violations.

Among other industrial metals, LME aluminum closed up 1.2% at $1,734.50, lead rose 2.3% to $2,321 and tin added 0.7% to $21,175. —