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(Bloomberg) -- Copper jumped by the most in two months and zinc hit a fresh decade-high as base metals rallied on a potent combination of a softer dollar, dwindling inventories and continued robust outlook for demand. Palladium rallied to a new record as all precious metals climbed.

Copper surged as much as 2.1 percent, the most since Nov. 13, to $7,262 a metric ton on the London Metal Exchange. All metals climbed as the Bloomberg Dollar Spot Index fell to the lowest since September, reinforcing sentiment in a market that’s being buoyed by signs of supply constraints and rebounding demand across the globe.

The improving demand outlook has helped lift the Bloomberg Commodity Index toward the highest level in 11 months. Gold climbed as the dollar weakened and investors weighed the risks of a potential U.S. government shutdown at the end of the week. Palladium hit a fresh all-time high, extending gains seen on Friday amid supply constraints.

A weaker greenback makes dollar-denominated commodities cheaper for buyers in other currencies. The yuan climbed to a two-year high, giving buyers in the world’s top metals consumer more purchasing power. The currency shifts are boosting sentiment toward commodities that have already benefited from a stronger economic outlook, as well as speculation that raw materials including metals are in line for further gains this year.

“The bullish view has become the consensus in the market, and it’s very hard to see a deep correction in prices from here,” Richard Fu, head of Asia Pacific sales at Amalgamated Metal Trading Ltd., said by phone from London. “The weaker dollar and bond markets are another factor, because if you have yields going higher, there’s a greater risk of inflation.”

The world is seeing “faster growth in all regions” with the global economy going from strength to strength, David Lipton, first deputy managing director of the International Monetary Fund, said at a conference in Hong Kong.

Mining stocks also climbed in London, with Glencore Plc hitting its highest in more than five years and Vedanta Resources Plc jumping as much as 7.8 percent.

Of all base metals, the improvement in fundamentals has been strongest in nickel, analysts at Bank of America Merrill Lynch said in an emailed note received Monday. Even with production at record levels, demand growth outpaced supply increases last year, spurring a drawdown in inventories and pushing the market into a deficit that will persist in 2018, the bank said.

Nickel rose 1.4 percent to $12,900 a ton as inventories tracked by the bourse fell to the lowest level since November 2016. Lead stockpiles slumped to the lowest level in two years, while orders to remove zinc hit the highest since November.

Other key price moves:

  • Zinc rose as much as 1.7 percent to $3,440 a ton, the highest since August 2007.
  • Lead gained 1.6 percent and aluminum rose 1 percent.
  • Tin rose 0.4 percent to $20,350 a ton, the highest in nearly three months.

--With assistance from Ranjeetha Pakiam

To contact Bloomberg News staff for this story: Martin Ritchie in Shanghai at mritchie14@bloomberg.net, Mark Burton in London at mburton51@bloomberg.net.

To contact the editors responsible for this story: Jason Rogers at jrogers73@bloomberg.net, Liezel Hill, Nicholas Larkin

©2018 Bloomberg L.P.

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