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Copper Heads for First Weekly Advance in Four on Inflation Hedge

Copper, trading little changed in Asia, headed for its first weekly advance in four, as investors sought to hedge against rising prices even as China may take further steps to cool inflation.

Copper for three-month delivery on the London Metal Exchange traded at $8,723.75 a metric ton by 2:14 p.m. in Singapore, after falling as much as 0.8 percent earlier. The metal reached $8,751.50 a ton yesterday, the highest price since Nov. 12.

China will shift to a “prudent” monetary policy next year, from a relatively loose monetary policy, Xinhua News Agency reported today. The country will adopt a “proactive” fiscal policy and strengthen flexibility of macroeconomic controls next year, Xinhua reported, citing a work meeting of Political Bureau of the Communist Party of China Central Committee.

“The threat to the rally has always been what China’s policy is going to be,” Zhuo Guiqiu, an analyst at Minmetals Futures Co., said from Shenzhen. “Raising interest rates isn’t going to stop the economy in its tracks. China is still going to grow.”

The metal for March-delivery on the Shanghai Futures Exchange climbed for a fifth day, by as much as 0.5 percent to 65,700 yuan ($9,863) a ton, erasing a loss of as much as 1 percent earlier. Futures on the Comex in New York were little changed after dropping as much as 0.8 percent to $3.9490 a pound.

“Some investors are probably squaring off their positions after a good run this week,” said Zhuo. “Nothing has changed fundamentally. Expectations for higher inflation and ongoing economic recovery will drive prices higher.”

Weekly Gain

Copper in London is still up 5.9 percent this week, the most since the week ended July 23, after reports showed manufacturing in China, the U.S. and Europe expanded, adding to signs of a revival in demand. China’s output grew at a faster pace for a fourth month in November even as the country raised interest rates for the first time since 2007 in October.

“Global manufacturing reports this week suggest the recovery is intact,” said Zhuo. “Falling London and Shanghai exchange inventories suggest demand is stable.”

Copper stockpiles in LME warehouses have shrunk 30 percent this year, on course for the first annual decline since 2004. Inventories were 352,425 tons yesterday, the lowest level since October 2009. Stockpiles monitored by the Shanghai Futures Exchange dropped last week for the first time in four weeks.

In Chile, wage talks at Anglo American Plc and Xstrata Plc’s Collahuasi venture are set to extend into a fifth day as union and company representatives seek to end a strike at the world’s third-biggest copper mine, a union leader said yesterday.

The Collahuasi strike entered its 28th day yesterday, the longest recorded at a major Chilean copper mine, surpassing the 26-day dispute at BHP Billiton Ltd.’s Escondida in 2006.

Zinc in London fell 1.1 percent to $2,236.25 a ton, and tin fell 0.4 percent to $25,450 a ton. Aluminum rose 0.2 percent to $2,353.75 a ton, while lead and nickel were little changed at $2,370.75 a ton and $23,655 a ton respectively.

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