LONDON – Zinc dropped the most in a week as some investors closed out bullish bets on this year’s best-performing major commodity.
The metal fell as much as much as 1.3% in London after touching a 15-month high on Monday. Zinc has rallied 45% this year on expectations of a supply shortage after mine closures from Australia to Ireland. The advance pushed it near a technical level, suggesting to some traders that prices may be poised to retreat.
“Perhaps some investors are taking profits," Casper Burgering, an analyst at ABN Amro Bank NV in Amsterdam, said by phone. "I don’t think that’s something to worry about. We expect for the coming two years deficits in zinc and that’s keeping prices high."
Zinc for delivery in three months fell 0.9% to $2 341 a metric ton by 11:14 am on the London Metal Exchange. Its 14-day relative-strength index approached 70 yesterday, a level indicating prices may be overbought.
September 7 is the first Wednesday of the month, when option contracts on the LME expire. The most widely held popular bullish option on zinc is for a gain to $2 400, according to LME data.
"Watch for a move higher as option participants look to hedge their exposure to the $2 400 strike," Keith Wildie, a partner at brokerage Vantage Capital Markets in London, said by e-mail.
In other metals news, aluminium rose 0.4% after touching the lowest since mid-June on Monday, while copper increased 0.4%. Goldman Sachs Group said aluminium and copper may drop in the second half on slowing demand growth and rising supply. The FTSE 350 Mining Index rose for a fourth day, gaining 0.5%, as Anglo American climbed 2.4%. Lead and tin were little changed on the LME, while nickel rose.