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Metals storm higher as copper rallies more than $200/mt

04/04/06

The buy the dip mentality seems to be firmly back in working order as the bulls took full advantage of Friday’s late sell-off to go bargain hunting. In their rush to buy any doubtful shorts had to run for cover or face being trampled on. The powerful combination of fund buying and short-covering ended up with copper rallying from opening levels of $2,405 to fresh highs at $2615, a $210 move on the day. Falling stocks and ongoing concerns over supply are helping to fuel the rally, but in the end the start of the month brought with it a new influx of fund money and the buyers seemed to be scrambling over each other to get invested.

Nickel was particularly strong, rallying $900/mt which took it to new highs for 2006, tin also extended its gains getting nearer to its $8,500 target and zinc hit new highs at $2,750/mt - no surprise there. The metals that lagged behind were aluminium and lead. Aluminium just managed to climb above $2,500 again, but was still below its late March highs at $2,565/mt and well below its February highs at $2,678/mt. Likewise lead seemed to be asleep during yesterday’s activity, with prices closing just $15/mt higher and still very much in its consolidation zone.

Although you can raise questions as to the quality of the buying, while the funds are prepared to buy regardless of the price, there is little point in standing in the way. The interesting feature of yesterday’s trading was the fact that aluminium struggled. Does this mean it is being capped by producer selling, or are funds moving switching between the metals? In addition, over recent weeks the forward spreads on some of the metals have started to indicate producer selling. This has been most notable in zinc and nickel so will these higher prices encourage even more selling?

- ends -

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William Adams
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