Copper rose to a one-week high on Wednesday as robust US housing data overnight boosted sentiment and buyers in top metals consumer China took advantage of low prices to build stocks. Housing starts in the United States surged to an eight-month high in July, suggesting a house market recovery was back on track after stalling in the second half of last year.
Copper is used mostly in the construction industry for cables, electric wiring, plumbing and in heating and ventilation systems. Three-month copper on the London Metal Exchange hit a one-week high of $7,019 a tonne, before paring gains to close at $7,010 a tonne, up 2.1 percent. The price had fallen to $6,821 last week, its weakest since June 23.
"The economic data released in the US, which is one of the biggest consumers of copper, was extremely strong and this has certainly pushed the metal higher," said Naeem Aslam, chief market analyst at Avatrade. "Having said that, we are seeing very low volume in terms of trading for the metal as investors are reluctant to put further money to work ahead of the FOMC (Federal Open Market Committee minutes) due later this afternoon."
Minutes of the US Federal Reserve's July policy meeting are due later on Wednesday. Investors will be looking for signals on the health of the US economy. Copper broke above its 50-day moving average at around $6,989, triggering more gains in afternoon trade. VTB Capital analyst Andrey Kryuchenkov said copper's breach of the $6,930 resistance level had triggered some short covering.
"Copper has been trading in a tight range for the past few sessions. Once we saw a sustained breach of the 6,930 resistance level, people jumped back in," he said. In top copper consumer China, the outlook for housing has been mixed and is starting to drag on economic growth, keeping pressure on the price of the metal. But UOB-Kai Hian Securities analyst Helen Lau suggested there is likely to be a recovery in seasonal demand for copper by fabricators from September.
Domestic premiums for copper in China rose to more than 200 yuan per tonne this week from less than 150 during most of July, suggesting that some end-users were taking advantage of lower prices to restock. But demand for metal in bonded zones has remained modest since banks tightened lending terms after a financing scandal in the Chinese port of Qingdao. Premiums are down by 37 percent at $85-95 since July 10, according to China data provider Shmet. A flash gauge of China's factory sector is due for release on Thursday.
In other metals, aluminium hit its highest level since late February last year at $2,083,75. It closed at $2,076 a tonne, up 1.8 percent. Zinc hit its highest in nearly two weeks at $2,361 a tonne, before paring gains to close at $2,356, up 2.4 percent. Lead hit a one-week high at $2,263.25, before closing at $2,259, up 1.5 percent. Nickel hit its highest in nearly two weeks at $19,069, before closing at $18,950, up 2.2 percent. Tin closed 0.1 percent higher at $22,420.
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