AFP: Base metals bounce back with bullish oil and gold
Base metals, the commodity market segment that gained importance for its resilience during the recent economic recession, have adopted the direction of the bullion and crude and the prices of almost all base metals are headed higher, said analysts at MF Global.
Metals ended mixed on Thursday, as another choppy session in the dollar weighed on the markets.
The greenback opened up stronger, but gradually weakened over the course of the day to once again push above the 1.50 mark against the euro.
This allowed metals to recover some of their earlier losses, and also pushed energy prices close to unchanged by the close of Thursday trading.
MF Global analysts said that Shanghai copper stocks are down by 4,241 tonnes this week and there is news of an increased industrial demand in Europe.
"On the macro front, we are getting lots of constructive data out of Europe this morning. Manufacturing readings expanded for the first time in 17 months, and service industries also grew at a good clip in October," said MF Global analysts.
A continuous rally in metal prices has however turned the analysts skeptical of whether the rise in prices of metals like copper, zinc, aluminium and nickel supported by demand at places other than China and Europe. "While we remain bearish on the dollar's longer-term prospects, we suspect that we are quite oversold in the short-term. We therefore would be wary about chasing this current bounce in metals, enticing as it looks on many of the charts," said analysts.
MF Global was bullish on copper and analysts said that the price of the precious metal currently pegged at about $6,650 a tonne may touch $7,200 a tonne in the medium term.
"We are at $6,652 on copper, up $62. With two days of closes above $6,549 resistance behind us, there is little resistance apparent on the charts until the $7,200 mark," they said.
Aluminium which is at $1,983 a tonne may rise to $2,050 a tonne.
"Another close above $1,950 is now behind us, and points to a breakout that could potentially take us to the $2,050 level."
Zinc which is selling at $2,100 a tonne may rise to $2,370 a tonne. Lead, which is at $2,430 a tonne, may rise up to $2,525. Nickel is at $19,402, up $247, but charts have shown enough to take prices possibly towards $20,200.
