Metals prices to remain bullish during 2007 BarCap

Metals prices will remain bullish during 2007, supported by low inventories, a falling dollar and strong oil prices, Barclays Capital said Tuesday.

Commodity prices remain driven by tight supply and demand fundamentals, an increase in mining costs and hedge fund activity, Gerald Baker told delegates at the Mines & Money conference, forecasting an average cash copper price of $7,725 a metric ton for 2007, which exceeds most other analysts' forecasts.

Currently LME prices for three-month delivery are trading at around $6,870/ton.

The pitfalls for the market's direction would be a downward revision for growth in the Organization for Cooperation and Development, particularly for the U.S., where a further slowdown in the housing market would remain key for the copper market.

"There is also concern for a downturn in economic growth in China, where copper and nickel imports have fallen and there has been some evidence of copper substitution with aluminium," Baker said.

Barclays forecasts gold prices to average $595 a troy ounce for next year, while pegging average cash prices at $2,738/ton for aluminium and $30,375/ton for nickel.