METALS-Copper ends up as funds seek safety in hard assets

* Investors fearing excess liquidity, seek hard assets

* Aluminum underpinned by higher power costs

(Changes headline, adds NEW YORK to dateline, recasts, updates
with New York closing copper prices, adds comments)

By Chris Kelly and Michael Taylor

NEW YORK/LONDON, Nov 30 (Reuters) - Copper ended firm on
Monday, with prices in both London and New York holding near
14-month highs, as investment funds continued to seek safety in
tangible assets such as the industrial metals as a hedge against
inflation.

Copper for March delivery HGH0 on the New York Mercantile
Exchange's COMEX division rose 5.15 cents to settle at $3.1770 a
lb, after dealing between $3.1060 and $3.1835.

On Friday, the benchmark March contract climbed to $3.23, its
loftiest level since September 2008.

"The market is setting itself up for a nice breakout at the
beginning of the month," said Larry Young, senior trader with
Infinity Futures Inc in Chicago. "You will see money go to work at
the beginning of the month and continue to see what has been
established this year, that the metals are a main driver in terms
of asset class."

At the London Metal Exchange (LME), three-month copper MCU3
closed up $75 at $6,930 a tonne, well within last week's 14-month
peak above $7,000.

The large amounts of money pumped into the economy by
governments around the world and low interest rates have raised
the specter of spiraling inflation in the years to come.

Investors seeking to protect their assets have piled into
commodities, which also become cheaper when the dollar falls.

"Liquidity floating around the system makes it difficult for
investors not to diversify into hard assets," said Eugen Weinberg,
an analyst at Commerzbank.

The dollar slipped against the euro on Monday as easing
concerns about Dubai's debt problems and upbeat regional business
activity data in the United States diminished the American
currency's safe-haven appeal. [USD/]

A soft dollar typically lifts dollar-denominated metals by
making them cheaper to buy for non-U.S. investors.

Copper was additionally buoyed by economic and demand optimism
after data showed India's economy expand at its fastest rate in 18
months in the quarter through September. [ID:nDEL328056]

"The surprise in the overseas data with India's 7.9 percent
growth year-over-year in the third quarter ... obviously they are
a key metals consumer, and I think that is providing some support
to it," said Peter Buchanan, commodities analyst at CIBC.

INVENTORIES ON THE RISE

Stocks of copper in LME warehouses at above 438,000 tonnes are
up 70 percent since the middle of July and the highest since
April, while stocks of aluminum at near 4.6 million tonnes are
near the record high of 4.269 million tonnes seen in September.

But about 70 percent of aluminum stocks are said to be tied up
until next May in financing deals, which means they are not
available to the market, and that is one reason why aluminum
prices are up more than 30 percent since January.

Rising prices have triggered a restart of smelting capacity,
especially in China, the world's largest producer.

That will check price gains, but analysts expect support from
higher energy prices, which make up 30 percent or more of aluminum
smelting costs.

"Increased production costs due to power price hikes in China
last week will sustain the upward momentum in the metals complex
towards the year end," Deutsche Bank said in a note.
[ID:nPEK268089]

Aluminum MAL3 ended up $39 at $2,055 a tonne, tin MSN3
closed up $305 at $15,200, and nickel MNI3 closed at $16,400
from $16,085 a tonne on Friday, when it touched $15,751 -- its
lowest since July 22.

Stocks of nickel at above 137,000 tonnes are the highest since
February 1995 and are also undermining prices of the metal used to
make stainless steel.

Battery material lead MPB3 closed at $2,345 from Friday's
last bid at $2,290 and zinc MZN3, used to galvanize steel at
$2,322 from $2,230.

Metal Prices at 2005 GMT
Metal Last Change Pct Move End 2008 Ytd Pct

move
COMEX Cu 314.55 5.20 +1.68 139.50 125.48
LME Alum 2065.00 49.00 +2.43 1535.00 34.53
LME Cu 6969.00 114.00 +1.66 3060.00 127.75
LME Lead 2343.00 3.00 +0.13 999.00 134.53
LME Nickel 16355.00 270.00 +1.68 11700.00 39.79
LME Tin 15100.00 115.00 +0.77 10700.00 41.12
LME Zinc 2312.00 82.00 +3.68 1208.00 91.39
SHFE Alu 15570.00 125.00 +0.81 11540.00 34.92
SHFE Cu* 54420.00 920.00 +1.72 23840.00 128.27
SHFE Zin 18050.00 345.00 +1.95 10120.00 78.36
** 1st contract month for COMEX copper * 3rd contract month for
SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07

(Additional reporting by Pratima Desai in London; Editing by
Sue Thomas and Lisa Shumaker)
((michael.taylor@reuters.com; +44 207 542 0919; Reuters
messaging: michael.taylor.reuters.com@reuters.net))