- Technical indicators show industrial metals may be oversold
- Traders with bearish bets buying back metal to cover positions
Copper and nickel led an industrial-metals rebound on speculation that the slump encouraged some traders to close out bearish bets and as oil prices surged.
The 14-day relative-strength indexes for each of the six main contracts on the London Metal Exchange were near or below the level of 30 that indicates to some traders that prices may be poised to rebound. Crude oil helped spark a rally in commodities as tensions in the Mideast rose after Turkey shot down a Russian warplane.
The LME’s gauge of metals reached the lowest since April 2009 on Monday and has slumped 26 percent this year as a slowdown in China, the top commodities user, cut demand and added to a glut of metal. With prices of copper, aluminum and zinc close to the lowest in six years, mining companies are seeing profits fall. A Bloomberg gauge of producers’ shares is near its lowest in seven years.
“It seems that for the moment the bears have taken a rest, and after yesterday’s selloff there even seems to be some modest short covering,” Malcolm Freeman, a director of West Malling, England-based brokerage Kingdom Futures Ltd., said in an e-mailed note. “Little has changed and it is likely that the downward spiral will continue.”
Nickel for delivery in three months rose 5.7 percent to settle at $8,770 a metric ton at 5:52 p.m. on the LME, the first increase in seven sessions. It earlier touched $8,145, the lowest since 2003. The material, used to produce stainless steel, is the worst-performing metal on the bourse this year, with a drop of 42 percent.
While stockpiles of the metal in warehouses monitored by the LME are at the lowest since December, they’re still almost five times larger than they were four years ago.
Copper added 2.6 percent in London. Aluminum, lead, tin and zinc also advanced. In New York, copper futures for delivery in March gained 2.3 percent to $2.069 a pound, the biggest increase since Oct. 9.
Also helping metals prices was a U.S. government report showing the economy expanded at a faster pace in the third quarter than previously reported. Gross domestic product rose at a 2.1 percent annualized rate, up from an initial estimate of 1.5 percent.
The rise in crude oil “is probably dragging the base metals a little higher,” Mike Dragosits, a senior commodity strategist at TD Securities in Toronto, said in a telephone interview. “U.S. GDP may be giving a boost to the demand-side component of commodities in general.”