Copper rises

Copper rose on Monday as a weaker dollar and record bullion prices boosted sentiment and lead was up 4.6 percent at one point as funds piled in, analysts said. Lead for delivery in three months on the London Metal Exchange hit an intraday high of $2,750 after breaking a technical resistance level prompting fund buying.
It closed at $2,735 a tonne, up 4 percent since Friday's close of $2,630. Copper ended at $7,400 a tonne, up 1.4 percent, compared with $7,300 on Friday. Prices have risen by over 10 percent over the last two weeks. "The weaker dollar and precious metals are helping base," Wiktor Bielski, analyst at Morgan Stanley, said.
A weaker US currency makes dollar-denominated metals cheaper for holders of other currencies. "There's lots of talk about fund flows into commodities ... There are lots of supportive factors to counterbalance economic weakness in the United States," Bielski said.
A trader said short-covering had pushed lead higher and that commodity trading advisors (CTAs) had exacerbated the move. "Technically, lead should continue to move higher," he said. The dollar hit seven-week lows against the euro and yen on growing speculation the US Federal Reserve would slash interest rates by half a percentage point before the month ends.
On the back of a soft dollar, gold hit a record high of $914 an ounce. Traders said commodity index buying had supported the base metals complex metals since last Tuesday. "It will end today and that will put a dampener on the market," another LME trader said.
"People will start looking at the fundamentals, which don't look good," he said referring to investment bank forecasts of recession in the United States. Economic slowdown in the United States and the knock-on effect on the global economy pushed copper prices to nine-month lows last in December. That fear is still there.
"The biggest concern is clearly the depth and duration of the downturn in demand in the developed world and the extent to which this may have a knock-on effect on growth in the developing world," Macquarie said in a research note. "However, the threats are certainly not all to the downside, with the continuing risks that Chinese demand will exceed expectations and, of course, that supply will once again underperform expectations."
Talk of tighter copper supplies if China introduces a 17 percent value added tax on scrap recyclers, who are currently exempted could also help prices. The rumoured tax has already prompted some importers to cut scrap shipments.
"If it does happen, it will have a big impact," Bielski said, adding that aluminium prices could be bolstered if China was to introduce an export tax on semi fabricated products. However, aluminium prices are expected to be firmly underpinned by rising prices of energy, a key component in the production process.
Aluminium closed at $2,548 a tonne from $2,514 on Friday and steel making raw material nickel was up at $29,300 a tonne from $28,650. "Reading through the news, it sounds like the stainless steel market picked up quite sharply in Europe over the last six months," Bielski said. Zinc closed at $2,396 from $2,390 on Friday and tin was last quoted at $16,425/16,450 from $16,300/16,305.