LONDON — Copper gained on Wednesday with buyers returning to the market after selling in the last days of 2007, but doubts about global economic growth dampened sentiment, analysts said.
Other commodity markets hit records, with gold rising to an all-time high of more than $850 (U.S.) per ounce and oil touching $100 per barrel, but positive sentiment in these markets did not spill over into industrial metals.
“There is a bit of bargain hunting ... volumes are much better than New Year's Eve but the markets are still pretty subdued,” analyst Leon Westgate at Standard Bank said.
Copper for delivery in three months on the London Metal Exchange was up $85 at $6,755 per tonne at the end of the day after it earlier traded up to $6,820.
MF Global's technical charts for copper were neutral at these levels with prices drifting in a range with support at $6,430 and resistance at $7,080, analyst Edward Meir said in a report.
“The bias could resume towards the downside, especially if U.S. numbers disappoint this week,” he said.
On Monday the metal, used widely in sectors such as construction and power, fell about 2 per cent to close at $6,670.
The U.S. Institute for Supply Management index for December, a key gauge of U.S. economic performance, was at its lowest since April, 2003, data which knocked the dollar, but metals prices did not immediately react.
The U.S. Federal Reserve at 19:00 (GMT) will release minutes from its last rate setting meeting in which it cut rates by 25 basis points.
“The market will take this week to assess the situation and then it will pick up next week,” Westgate said, pointing to the reweighting of fund indices.
Between January 8 and 14, the Dow Jones AIG commodity index
will adjust the weighting of many commodities including zinc, nickel, copper and aluminum.
The adjustment is likely to involve the purchase of about 250,000 tonnes of zinc.
“Zinc would likely be the main beneficiary,” Mr. Westgate said.
Zinc ended the day $85 higher at $2,400/2,402 a tonne, after shedding around 45 per cent in 2007.
However, the impact of the reweighting was expected to be short-lived as the markets looked sluggish due to concerns about the health of the world's economies and future metals demand, Standard Bank's Westgate said.
Economic growth in China, copper's top consumer, is expected to slow moderately this year as cooling policies take effect, the State Information Centre said.
Gross domestic product growth is projected to ease to 10.8 per cent in 2008 from an estimated 11.4 per cent last year.
Copper rallied 5 percent during 2007, its sixth straight annual increase, but well short of the 44 per cent gain in 2006.
Concerns about slowing Chinese demand growth as well doubts about the U.S. economy weighed on base metals in the latter part of 2007, prompted by credit worries and a spate of dismal data, which helped drag copper down from above $8,300 in October.
Despite that, LME stocks ended the year at 197,450 tonnes, equivalent to around four days of world consumption, and only 7,000 tonnes higher than at the end of 2006. Shanghai stocks were at 25,597 tonnes, down around 5,700 tonnes from the end of 2006. On Wednesday, LME stocks rose 1,475 tonnes to 198,925.
LME aluminum picked up $31 to $2,451.
The lightweight metal could be a strong performer in 2008 after it fell 14 per cent in 2007, buoyed by high energy prices.
Nickel, the key ingredient in stainless steel, closed at $27,200 per tonne, up from its previous close of $26,350.
Tin was untraded but quoted at $16,350/16,400 per tonne, down $50. Earlier it fell 4 per cent to an intraday low of $15,750 on option related selling which triggered stops, traders said.
Three-months lead gained $65 to $2,615 per tonne.
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