Copper rallied to a 15-month peak on Tuesday, as positive manufacturing data in the United States and China bolstered the economic outlook and a struggling dollar attracted more investment money flows at the start of the new month.
Copper for March delivery on the New York Mercantile Exchange's COMEX division jumped 5.40 cents, or 1.7 percent, to finish at $3.2310 a lb, its highest level on a settlement basis since the end of August 2008 on a weekly chart.
On the London Metal Exchange (LME), benchmark copper MCU3 ended up $145 at $7,075 a tonne, after hitting a session peak at $7,089 -- its highest since September 2008.
Copper maintained its early upside momentum after data from the Institute for Supply Management showed the U.S. manufacturing sector grow in November, but at a slower rate than expected. [ID:nN01398224]
The ISM report was "a bit less-than-expected but overall still a strong number when added to the previous monthly levels that were greater than 50," said Tom Sowanick, chief investment officer with the Omnivest Group in Princeton, New Jersey.
"Note that the China ISM was also up last night which confirms that we are in a global recovery," Sowanick added.
China's manufacturing sector grew at its fastest pace in five years, laying the foundation for solid economic expansion in 2010.
"China will continue to provide one level of support along with the weaker dollar," said Sterling Smith, an analyst for Country Hedging Inc in St. Paul, Minnesota. "Those two supports working together keeps things looking very, very strong."
The dollar slumped against a basket of currencies as risk appetite improved amid easing concerns about debt problems in Dubai. A weaker dollar makes commodities cheaper for holders of other currencies.
Also boosting sentiment was news that the euro zone manufacturing sector grew from the second consecutive month and at a faster pace than expected.
SLUGGISH FUNDAMENTALS
Industrial metals in recent months have been boosted by flows of money from investment funds looking for safety in hard assets such as metals, both precious and base.
Expectations are that further flows from pension funds seeking diversification and hedge funds looking to boost their returns will underpin the market.
"Funds are perfectly capable of pushing base metals higher, with new highs for copper and aluminum to be expected if the dollar loses more ground," VTB Capital said in a note.
"(But) we still favor a downside correction, as near-term fundamentals remain sluggish and stockpiles are still rising."
Stocks of copper in LME warehouses at around 441,000 tonnes are up 70 percent since July and the highest since April, while stocks of aluminum at near 4.6 million tonnes are within sight of the record 4.629 million tonnes seen in September.
Aluminum MAL3 touched $2,105 a tonne, the highest since Aug. 5 on buying related to activity in options, which give buyers the right to buy or sell the three-month contract at a fixed price in the future.
The metal used in transport and packaging ended up $48 at $2,103 a tonne.
Option expiry is on Wednesday. There are more than 18,400 outstanding contracts to buy -- far outweighing those to sell -- more than 460,000 tonnes of aluminum at prices between $2,000 and $2,150 a ton.
Stocks of nickel rose to 140,646 tonnes, the highest since January 1995 and only about 20,000 tonnes below the record high of 151,254 set on November 25, 1994.
Nickel MNI3 ended ended down at $16,295 from $16,400.
Zinc MZN3 finished up $50 at $2,372 a tonne, after hitting a session high at $2,392.75, its highest since April 2008. Lead MPB3 ended up $123 at $2,468, having earlier hit $2,470, the highest since October 21. Tin MSN3 finished flat at $15,200.
Gold bid at $1,208.55 an ounce late in Europe, compared with $1,196.00
quoted late in New York on Tuesday. * Bullion hit record highs at $1,216.75 an ounce earlier in Europe as investors bet on higher prices, with funds
lengthening positions due to expectations for a fresh leg of dollar weakness
and more central bank buying.
* Spot silver bid at $19.18 an ounce against $19.07 late in New York on Tuesday.
Market supported by gold's gains, earlier rising to $19.41 per ounce. * Platinum bid at $1,496.00 an ounce from $1,478.50. * Palladium bid at $387.50 an ounce against $380.00.