METALS-Copper hits 6-week high on nervousness ahead of Fed

Harpreet Bhal and Eric Onstad
Friday, 13 Dec 2013 | 12:16 PM ET

* U.S. PPI for November falls for third month

* Copper gains 1.8 percent this week

* Indonesian export ban to also hit aluminium

LONDON, Dec 13 (Reuters) - Copper touched a six-week peak on Friday in a sixth straight session of gains as nervous investors bought back short positions ahead of a U.S. central bank meeting that could decide the fate of its monetary stimulus.

Three-month copper on the London Metal Exchange closed up 0.4 percent at $7,255 a tonne, after touching a high of $7,265.25, its strongest since Nov. 1.

The metal used in power and construction was trading 1.8 percent higher for the week but down 8.6 percent so far for the year.

Many investors held short positions, betting on lower prices due to expectations for higher supply from mines in coming months, but some have been buying back those positions, a trader said.

Some shorts covered their positions after the copper price broke above its 200-day moving average (DMA), a key signal for investors who watch chart patterns.

"The 200 DMA has always been important and even more if we stay above on a weekly close," the trader said.

Copper also got support after data showed U.S. producer prices fell for a third straight month, pointing to scant inflation pressure that could give the Federal Reserve pause as it weighs the future of its monthly bond purchases.

The focus next week will be on a Fed policy meeting on Dec. 17-18 for any indications of when the central bank might begin reining in its massive monetary stimulus programme.

The stimulus programme has released more money into the economy and has been used to buy assets including commodities.

"It is all about the taper and its timing, of course," said Anita Paluch, a strategist at Varengold Bank.


Weighing on metals prices, however, was a slightly firmer dollar against a basket of currencies, following upbeat U.S. retail sales data on Thursday and the smooth passage through the U.S. House of Representatives of a budget deal to avoid a government shutdown.

A strong dollar makes commodities priced in the U.S. unit more expensive for holders of other currencies.

Tightening copper supplies supported the market. LME cash copper surged on Thursday to a $14.50 premium against the three-month contract , the highest since July 2012, before easing to $8 on Friday.

"We're definitely looking at this quarter and the first quarter of next year to be tighter than what the annual surplus would suggest," said Barclays analyst Sijin Cheng in Singapore.

Metals also were supported by a planned ban on unprocessed ore exports from Indonesia, including aluminium, which ended 0.5 percent higher at $1,799 a tonne.

"The aluminium market could be affected substantially in 2014 if Indonesia goes ahead with its proposed comprehensive ban on exports of unprocessed raw materials, given China's continuing reliance upon imports of bauxite from Indonesia," Natixis analyst Nic Brown said in a note.

Tin, also due to be hit by the Indonesia ban, was a strong performer, rising 1.1 percent to close at $22,750 a tonne.

Lead climbed 1.1 percent to $2,150 a tonne, and nickel rose 0.6 percent to $14,095.

Zinc, which failed to trade in closing rings, was last bid at $1,977, up 0.6 percent, after touching a six-week high of $1,978.75.


Three month LME copper

Most active ShFE copper

Three month LME aluminium

Most active ShFE aluminium

Three month LME zinc

Most active ShFE zinc

Three month LME lead

Most active ShFE lead

Three month LME nickel

Three month LME tin