Gold's rally to a two-month high spilled over to the London Metal Exchange Thursday and helped steady prices in the afternoon, though copper's outlook remains bearish, analysts said.
Disappointing U.S. economic data and news of Iran testing missiles pushed spot gold to $625.05 a troy ounce, the highest level since early September.
"We've had some spillover strength from gold but we're wary of this being a bull trap. Data from the U.S. has been very weak while the Chinese situation remains soggy with weak imports," Man Financial analyst Edward Meir said.
Gold's strength helped to maintain copper above support at $7,200 a metric ton after it briefly fell to an intraday low of $7,150/ton in early trade when stocks rose again.
LME copper inventories have started to rise in sizable chunks in recent weeks and were up 4,300 tons at 139,475 tons, adding to a perception of more supply coming forward.
Copper's cash-to-three-month spread has moved to contango after spending nearly two years in backwardation, indicative of tight supply.
"I think copper will crack the $7,000/ton support this month," Meir said, though traders noted some consumer bargain hunting at the lower numbers.
U.S. productivity data slowed to zero during the third quarter, below the forecast 1.4%, while jobless claims increased to 327,000 for the week of Oct. 28 from 309,000.
Friday's non-farm payroll data will provide further market direction.
LME aluminium also benefited from gold's rally after some pressure from technical sellers earlier in the day, traders said.
The LME's current divergence between copper, aluminium and lead, zinc and nickel would unlikely last long, with copper reasserting its overriding role soon, Meir said.
LME lead struggled after a 1,000 tons stock rise to 47,050 tons, trading at around $1,660/ton for much of the day.
On the positive side, the start of November would likely result in longs to be added in lead, zinc and aluminium as new money finds its way to the market, a trader said.
3 months metal (prices in dollars a ton)
Bid – Ask, Change from Wednesday PM kerb
Copper 7240.00-7245.00 Up 90.00
Lead 1665.00-1670.00 Unch
Zinc n/a -4260.00 n/a
Aluminium 2755.00-2756.00 Up 24.00
Nickel 31750.00-31800.00 Up 800.00
Tin 10050.00-10100.00 Dn 25.00
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