SHANGHAI – Copper jumped by the most in two months and zinc hit a fresh decade-high as base metals rallied on a potent combination of a softer dollar and continued robust outlook for demand. Gold and palladium also climbed.
Copper surged as much as 2.1%, the most since November 13, to $7 259 a metric ton on the London Metal Exchange, and traded at $7 240 at 7:10 a.m. in London , just below where it ended last year. Zinc gained 1.3% to $3 426 a ton to head for the highest close since 2007. Aluminium, nickel and lead also surged as the Bloomberg dollar index fell to the lowest since September.
“The key factor in today’s trading is probably the weaker dollar, which is giving strong support to both gold and the industrial metals,” Michael McCarthy, chief market strategist at CMC Markets Asia Pacific, said by phone from Sydney. A weaker greenback makes dollar-denominated commodities cheaper for buyers in other currencies. The yuan climbed to a two-year high, giving buyers in the world’s top metals consumer more purchasing power.
The currency shifts are boosting sentiment toward commodities that have already benefited from a stronger economic outlook, as well as speculation that raw materials including metals are in line for further gains this year. The world is seeing “faster growth in all regions” with the global economy going from strength to strength, David Lipton, first deputy MD of the International Monetary Fund said at a conference in Hong Kong.
“The global industrial outlook and the sentiment around that has improved significantly over the last couple of weeks,” CMC’s McCarthy said. The Bloomberg Commodity Index is headed for its highest close in 11 months, with Brent crude’s advance to $70 a barrel also fuelling gains.
The bright sentiment on commodities wasn’t dimmed by figures from China last week that showed a sharper-than-expected tightening of credit, as well a softening of commodity import demand. China is due to release another batch of macro data on Thursday, including industrial output and economic growth.
Among precious metals, spot gold advanced to a four-month high amid the slump in the U.S. currency as investors weighed risks surrounding talks aimed at averting a US government shutdown at the end of this week. Palladium traded at an all-time high, with silver and platinum also rising.