METAL-Copper up on weak dollar, tapering fears cap further gains

Mon Nov 11, 2013 12:11pm EST

* Tapering prospects grow after strong U.S. payrolls report

* Markets await result of key China Communist Party meeting

* Copper speculators slash net longs by 13,018 lots -CFTC

By Maytaal Angel and Harpreet Bhal

LONDON, Nov 11 (Reuters) - Copper edged up on Monday as a weak dollar and a pick-up in factory output in China helped offset heightened concerns that the U.S. Federal Reserve will start reducing stimulus as soon as next month.

Also keeping the metal in check, China's Communist Party leaders gathered at the weekend for a landmark conclave, due to end on Tuesday, that will set the economic agenda for the next decade.

Three-month copper on the London Metal Exchange ended at $7,173 a tonne, up from a last bid of $7,165 on Friday.

A Veterans Day holiday in the United States and armistice remembrance holidays in several European countries added to the quiet tone in markets.

Copper prices fell 1 percent last week, its biggest weekly fall since mid-September, but remained in a $7,000-7,420 band that has held since early August.

"We see prices around current levels or maybe lower through to the year-end," said Citi analyst David Wilson.

Helping gains was a drop in the dollar against a basket of currencies. A weak dollar makes commodities priced in the U.S. unit cheaper for holders of other currencies.

Surprisingly strong U.S. jobs data on Friday, however, brought forward expectations for when the Fed could start tapering its stimulus.

Ultra-loose monetary policy adopted by central banks around the world in the last few years has drawn investors to commodities as an alternative to interest-bearing assets.

"Base metals seem to be caught between two offsetting variables," said Ed Meir, analyst at INTL FCStone.

"Macro numbers coming out of China seem to be supportive, while on the downside, concern about U.S. tapering is manifesting itself via the stronger dollar and seems to be snuffing out any commodity rallies."

In China, factory output and export data suggested the world's No. 2 economy was stabilising after a period of slower growth, though a sharp rise in the country's inflation rate fanned worries of policy tightening.

China is the world's top consumer of copper, accounting for around 40 percent of refined demand. But prices have been blunted by a pick-up in supply that has helped China's factories produce record volumes of refined copper this year.

Data out earlier showed China's refined copper output reached 637,958 tonnes in October, hitting a record for the second straight month. Primary aluminium production reached 1,951,134 tonnes in October, also a record.

U.S. data on Friday showed hedge funds and money managers slashed net long or buy positions in copper by 13,018 lots to 87,689, reversing a sharp increase the previous week.

Aluminium ended at $1,809 from a close of $1,815 on Friday, zinc closed at $1,895 from $1,904, lead ended at $2,127 from $2,140, tin ended at $22,945 from $22,850 and nickel closed at $13,750 from $13,910.

PRICES

Three month LME copper

Most active ShFE copper

Three month LME aluminium

Most active ShFE aluminium

Three month LME zinc

Most active ShFE zinc

Three month LME lead

Most active ShFE lead

Three month LME nickel

Three month LME tin