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Metals holding just below recent highs - awaiting press fund buying

20/01/06

The metals put in a mixed day on Thursday, with zinc continuing its remorseless advance, copper challenging previous highs at $4630 before falling back below its $4600 pivot level, while the rest of the metals consolidated. Friday’s start is showing little direction although after yesterday’s weaker closes in all bar zinc, some further consolidation may well follow ahead of the weekend. This fits the chart pictures which show copper, aluminium, nickel and tin starting to move sideways this week, while zinc and lead forged higher.

As mentioned recently, the supply side fundamentals are likely to remain tight for most of the metals in the first part of the year, but we think there is the possibility for disappointment on the demand side. Yesterday’s economic numbers were generally weaker than expected. The Philadelphia Fed business index fell to 3.3 in January after 10.9 in December, it had been expected to rise to13. US housing starts fell 8.9% to annual rate of 1.933 million, lower than the forecast of 2.030 million, although jobless claims did improve, falling to 271,000 having been expected to be 315,000. The other factor not supporting these higher prices is the underlying up trend in LME stocks in all the metals except zinc. Stocks have over a period of months been on the rise and although in copper’s case they remain relatively low, the pick-up in stocks has been quite significant. Aluminium stocks have risen from below 500,000mt to 688,000mt, copper stocks have moved from 25,000mt to 106,000mt, nickel stocks have risen from 7,000mt to 36,000mt, while tin has seen stocks jump from 4000mt to 17,000mt. Zinc however continues it steady drawdown while lead stocks have only recently turned higher. So although investment interest may be keeping the prices lofty, the movement of metal into warehouse does suggest that the market is not as tight as the price movement suggests.

On today’s economic agenda is the release of the January University of Michigan’s consumer survey which is expected to rise to 92.5 after December’s 10 point increase to 91.5. In addition, Richmond Fed president Jeffrey Lacker is speaking about his 2006 economic outlook.

- ends -

For further information please contact:

William Adams
Metals analyst, BaseMetals.com
press@basemetals.com
http://www.basemetals.com

BaseMetals.com
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