LONDON: Copper prices hit five-week highs on Wednesday after U.S. Treasury Secretary Steve Mnuchin said a U.S.-China trade deal was 90% complete, but gains were capped by a higher dollar and concern about demand in top consumer China.
Benchmark copper on the London Metal Exchange was down 0.1% at $6,036 a tonne at 1003 GMT. Prices of the metal used widely in the power and construction industries earlier touched $6,063.50, the highest since May 21.
"There is a lot of volatility, copper is being led by the macro environment, the U.S.-China trade war and its potential impact," said BMO Capital Markets analyst Kash Kamal.
"Macro headwinds are very real, the environment is very uncertain and investors are watching key indicators of demand such as industrial production in China."
TRADE: U.S. President Donald Trump and his Chinese counterpart Xi Jinping will meet this week at the G20 summit in Japan hoping to calm their 11-month trade war.
"With this week's G20 and Citi's view of at least a truce/handshake, along with expectations of new stimuli from China's Politburo meeting next month, we are bullish copper," Citi analysts said in a note.
CHINA: Earlier this month, China's economy flashed warning signs as industrial output growth in May unexpectedly slowed to a more than 17-year low and investment cooled. Demand for base metals is highly correlated with industrial output.
China accounts for nearly half of global consumption of industrial metals, while the United States consumes nearly 10%.
DOLLAR: A higher U.S. currency makes dollar-denominated metals more expensive for importers in other currencies and could subdue demand. This is a relationship used by funds to generate buy and sell signals using numerical models.
CHILE: Labour unions at Chile's Chuquicamata copper mine voted on Saturday to reject the latest contract offer of government-controlled mining company Codelco, and to continue the week-long strike at the site.
"The Chuquicamata news broke a few weeks ago, the reaction was muted, which again shows the macro story is really driving the market," Kamal said.
TECHNICALS: First upside resistance for copper is at $6,070, a Fibonacci retracement level. This is followed by $6,100, where the 50-day moving average currently sits.
PRICES: Aluminium was up 0.9% at $1,830, zinc was unchanged at $2,543, lead was down 0.2% at $1,935, tin slipped 0.1% to $19,035 and nickel gained 1.1% to $12,435 a tonne.