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Copper heads higher, other metals less sure of their direction

30/03/06

With the end of the first quarter approaching it looks like various asset classes including the copper are being bid higher. On Wednesday copper reached a fresh high at $5,360, having spent most of the day in the red, below $5,300. Other leading metals, notably zinc and aluminium, were less bullish with aluminium falling back below the $2,500 at one stage and zinc failing to set a new high. Lead and nickel also headed lower, while tin held its head above the $8,000 level. Gold and equities also rallied into the close after their sell-off on Tuesday night following the more hawkish stance emerging from the FOMC, however, again this may be due to the month-end positioning.

Sentiment in the metals remains strong and while stocks are generally low by historic standards and the threat of supply disruptions hang over the market, it seems as though the investment community is more than happy to hold on to their long positions. As such it should not be too surprising to see metals prices continue to edge higher. Although at these already high prices new longs need to be aware that the risk reward is skewed to the downside, even though prices may still go higher before eventually correcting.

Thursday’s trading is off to a strong start with copper challenging $5370 and zinc at $2650, but given recent volatility it will be interesting to see whether the market holds on to these gains by the close. US data out today includes GDP (expected to rise 1.7% with the deflator at 3.3%) jobless claims (expected to be 305,000 after 302,000), help wanted index and EIA Natural Gas report and Farm prices.

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