LONDON: Copper prices climbed on Tuesday on signs of firmer demand, less disquiet over the global banking sector and hopes that the U.S. central bank will scale back increases to interest rates.

Three-month copper on the London Metal Exchange (LME) gained 1.6% to $8,833.50 a tonne by 1115 GMT, having fallen into the red earlier in the session.

“The gains are being driven by a second day of calmer markets after the banking crisis has moved a bit to the back of people’s minds,” said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.

Risk sentiment was recovering as global shares recovered after the rescue of Credit Suisse arrested a rout in bank stocks.

“Demand in China is also showing signs in picking up from a slow beginning and the longer-term outlook remains strong,” Hansen added.

“This is not a market where you want to be short; you might have to reduce exposure, but not one where you want to be short.”

Copper prices rise in volatile market

Hansen said that bullish comments at a commodities conference were also supporting the market, including Goldman Sachs saying it expects a commodities supercycle and trader Trafigura predicting that copper prices will hit a record high within 12 months.

The most-traded May copper contract on the Shanghai Futures Exchange rose 0.8% to 67,530 yuan ($9,817.26) a tonne.

The dollar index slipped, with traders expecting the banking sector crisis to keep the U.S. Federal Reserve from raising interest rates much further.

A weaker dollar makes commodities priced in the U.S. currency cheaper for buyers using other currencies.

The LME cash copper contract was trading at a premium of $13 a tonne over the three-month contract <CMCU0-3>, flipping this week from discounts that have lasted since Jan. 19, indicating tightening near-term supply.

LME aluminium rose 0.2% to $2,279.50 a tonne, nickel added 0.3% to $22,865 and tin gained 1% to $22,980 while zinc shed 0.8% to $2,864 and lead dipped 0.1% to $2,116.50.