Copper climbed more than 1 percent on Thursday, headed for a third day of gains, on a weaker dollar and after stronger housing data from the United States and China bolstered sentiment about demand for industrial metals.
Three-month copper on the London Metal Exchange rose 1.2 percent to $7,730 per tonne by 11:56 SA time, adding to two previous sessions of modest rises.
It touched an intraday high of $7,734 a tonne, backing off from the top of the recent range of 7,738.
The metal, widely used in construction and power, has gained nearly 6 percent since June 22 as hopes rose of further monetary easing by central banks and after an EU deal to boost the euro zone.
Some investors may be expecting that copper fundamentals will reassert themselves following the European summer, said analyst Stephen Briggs at BNP Paribas in London.
“The copper market's still basically in deficit and I think it'll be tighter in three or four months' time than it is now,” said Briggs, who forecasts copper to climb to $9,000 a tonne late this year.
“It's a bit early to be positioning for September onwards when demand begins to pick up, but you actually often see big moves in August in some years, so people may be positioning ahead of the positioning.”
HOPES FOR CHINA EASING
Prices were also lifted by signs that China could announce further monetary easing measures as soon as this weekend after Premier Wen Jiabao said the government would step up efforts to boost the economy in the second half.
Chinese traders hope infrastructure investments in the next few months will prop up demand. According to media reports, China's big four state banks doubled their pace of lending in the first half of July from a month ago in part due to a pickup in borrowing by government-led investment schemes.
The most active November copper contract on the Shanghai Futures Exchange climbed 0.8 percent to 56,230 yuan ($8,800) per tonne, after falling 0.3 percent previously.
“Prices haven't moved much today as buying power is still not strong. But talk in the market that Beijing may be announcing more monetary easing over the weekend is keeping the shorts at bay for now,” said Orient Futures Derivatives department director Andy Du.
In the United States, data showed groundbreaking of new homes rose in June to its highest pace in over three years, easing some worries about an economy showing signs of cooling.
A day earlier, data showed China's home prices broke eight straight months of decline to rise in June.
In physical markets, traders said their copper sales were much lower compared to a year ago.
“In the copper downstream markets, there is a slight pick-up in state grid construction and construction, but these are still too weak now to boost overall demand,” said an analyst with a trading firm.
Traders added that lead is one of the strongest base metals in the Chinese market now due to a surge in battery production this year.
“From the statistics we've gathered, China's battery sales this year up to the end of May rose by 12 percent - a big boost to lead sales. Despite this, prices have been pressured by macroeconomic uncertainties,” said an analyst with an international trader.
LME lead, which has shed 6 percent so far this year, rose 0.2 percent to $1,913.50 a tonne.
Analyst Andrew Keen at HSBC in London has cut his 2012 forecast for nickel by 10 percent to $18,030 a tonne, but says the market may temporarily tighten later in the year.
LME nickel gained 0.8 percent to $16,230 a tonne.
“We still expect the market to remain in marginal surplus of 8,000 tonnes, but now believe that nickel production cuts, including Chinese NPI (nickel pig iron) and delays in the ramp-up of new projects may actually push the market in a temporary deficit in 4Q12 or 2013,” he said in a note.
In other metals, aluminium added 0.6 percent to $1,919.75 a tonne, zinc added 0.4 percent to $1,875.75 and tin rose 0.5 percent to
$18,890. - Reuters