Three-month aluminium and lead were star performers at the London Metal Exchange Friday, climbing to over two-week highs on technical buying and weakness in the U.S. dollar, and look poised to extend those gains in the near future, analysts said.
Meanwhile, copper prices fell by over 1% but are still hovering near key technical levels including the 200-day moving average of $7,015.07 per metric ton and the psychological $7,000/ton price level.
The fall in copper followed a report showing the U.S. manufacturing sector contracted in November.
The euro broke through the $1.33 mark Friday, hitting a fresh 20-month high, as the Institute for Supply Management index declined to 49.5 in November, versus a reading of 51.2 in October and against an expected reading of 52.0.
Meanwhile, the weakness in the dollar has propelled a number of other base metals higher, analysts said.
Three-month aluminium jumped 3% on technical and options-related buying ahead of the LME PM kerb, extending earlier gains, as market participants positioned themselves ahead of options expiration next week, a trader said. Another trader said the next upside target is $2,850/ton.
Lead also pushed up to over two-week highs on technical buying, pushing above the key $1,700/ton price level. The move was exacerbated by thin trading volumes.
Lead stocks fell by 650 metric tons to 43,150 tons Friday, according to the LME. Moreover, "the winter period is historically a period of high demand for the heavy metal and we would envisage continued strength for the metal in the short-medium term," Standard Bank said in a report earlier.
Three-month nickel hit all-time highs of $34,400 a metric ton Friday, before profit taking capped those gains.
One nickel trader said supply concerns adds to already strong speculative demand.
"The weaker U.S. dollar is supportive to prices but the announcement this week that (BHP Billiton's) Ravensthorpe mine (in Australia) would delay its production into 2008 from the second quarter of 2007 is causing a flurry of analysts to revise their supply/demand deficit projections," a base metals analyst said. "We're in an extremely tight situation as the supply is just not there," said the analyst.
Overall, there is nothing to stop nickel prices from going higher now, the analyst noted, adding weakness in the dollar adds further upward momentum.
At present, nickel stocks remain at critically low levels, falling by 660 tons to 6,066 tons Friday, according to LME warehouse data.
3 months metal (prices in dollars a ton)
Bid – Ask, Change from Thursday PM kerb
Copper 6998.0-7000.0 Dn 82
Lead 1690.0-1695.0 Up 30
Zinc 4390.0-4400.0 Up 17
Aluminium 2815.0-2820.0 Up 78
Nickel 33900.0-33950.0 Dn 45
Tin 10675.0-10700.0 Up 250
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