Source: Reuters
London— The prices of industrial metals rose to new multiyear highs on Tuesday, while gold closed at its highest this year, as the dollar fell on fears central banks were shifting reserves out of dollar assets.
Copper futures rose to new 16-year highs in London and zinc hit levels last seen in October 1997 as the weaker dollar encouraged funds to buy.
New York prices initially jumped, but slipped back later on profit taking after weaker-than-expected economic data.
Spot gold jumped 1.6 percent to its highest since the start of the year at $433.90 a troy ounce, while spot silver was fixed at its highest since early December.
Commodities are a darling of financial markets as relatively weak performances by equities and bonds spur investors to cast their nets wider in the search for yield.
"The performance of commodity investments has picked up strongly this week, buoyed by a further round of dollar weakness and concern about tight oil markets," Barclays Capital said in a daily report.
"The industrial metals sector has been the outstanding performer so far in February."
Supply tightness
Mining equities were also boosted earlier in the day on news that Brazilian mining giant Companhia Vale do Rio Doce (CVRD) was able to command a price rise of almost 72 percent on the iron ore it sells this year to Japanese steel makers.
London Metal Exchange copper for three-months delivery peaked earlier at $3,260 a tonne, just off its January 1989 record of $3,280.
The metal ended at $3,242, still up more than one percent on Monday's close.
Likewise March copper at the COMEX division of the New York Mercantile Exchange peaked at $1.505 a lb after the open, but settled at $1.4895, down 0.25 cent a lb, after an important gauge of U.S. consumer confidence eased in February.
"With the dollar being so weak, I'm looking for $1.50 again tomorrow and a settlement above it, and even higher prices in the next week or so," said analyst Scott Meyers at Pioneer Futures in New York.
Genuine supply tightness and chronic under-investment in many commodity sectors, but notably in oil and industrial metals, have underpinned price rises.
Global LME copper inventories are about 19 percent of what they were a year ago — but traders said technical considerations and dollar movements were more influential in moving the market this week.
The dollar tumbled on Tuesday, hurt by market worries that central banks were diversifying reserves out of U.S. assets.
A falling U.S. currency makes dollar-denominated commodities cheaper for overseas investors.
Gold buoyant, zinc at highs
Analysts said gold, which has struggled to rally decisively since hitting a 16-1/2-year peak in December at $456.75, might move much higher. COMEX April gold rose $7.40 to $435.80 an ounce, its highest close since Dec. 30.
"The funds are still very underweight gold … so there's a lot of room," HSBC metals analyst Alan Williamson said.
"The euro is moving in the right direction so things are looking very positive."
Zinc, which has jumped 10 percent this year, touched its highest since October 1997 at $1,397, but also mirrored copper's later slight retracement to finish at $1,391, still up $23.
Belgium's Umicore said on Tuesday it planned to cut its annual zinc production by 130,000 tonnes to focus on the production of specialty zinc products_[NL22478622].
Specialist metals were also up, with chrome prices at their highest since June 1998 on strong demand from the aerospace industry.
The prices of mobile-telephone metal gallium hit a 2-1/2-year high.
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