* Speculators buying back short positions in copper, zinc
* Zinc's technical outlook turning bullish - Triland
* Coming up: U.S. consumer credit data for May at 1900 GMT
(Updates with closing prices)
By Harpreet Bhal and Eric Onstad
LONDON, July 8 Copper, aluminium and zinc
touched fresh peaks on Tuesday, driven by speculators buying
back short positions as the outlook for the global economy
Zinc rose to its loftiest in three years, also boosted by
uncertainty over future shortages, while aluminium hit a
one-year high and copper the strongest in nearly five months
"It's short-covering by funds and CTAs (commodity trading
advisors). Copper went up through resistance, as did zinc," a
London trader said.
CTAs, also known as managed future funds, often use computer
trading strategies based on chart patterns.
"The background sentiment is more positive these days,
particularly following those figures from the States last week,
not to mention the PMI from China."
Prospects for economic recovery gathered pace following last
week's encouraging U.S. jobs data and upbeat factory numbers
from top consumer China that reinforced expectations of a
pick-up in demand.
Benchmark London Metal Exchange (LME) zinc climbed
to a session high of $2,318.50 a tonne, its strongest since Aug.
5, 2011, before paring gains to closed at $2,282, up 0.84
One trader said some prices retreated partly due to some
speculators taking fresh short positions in zinc and lead.
The metal used for galvanising steel has risen about 10
percent so far this year, lifted by expectations that mine
closures and declining ore grades would lead to shortages.
Broker Triland said zinc was attracting investment fund
buying following a strong weekly close on Friday.
"The price has cleared the horizontal resistance zone around
$2,230-35 and with all moving averages pointing higher and the
price sitting comfortably above them, the bull trend is
strengthening," it said.
"We believed there may be some correction to come this week,
but have been proved wrong, to the consternation of some
consumers who may have missed the boat now."
Copper jogged to a session high of $7,212 a tonne,
the strongest since Feb. 19, before retreating to finish at
$7,130, down 0.1 percent.
Copper, widely used in the power sector and in construction,
posted its biggest weekly rise in more than nine months last
week, but some analysts believe traders could be tempted to cash
"After a stellar rally for the metal, the profit-taking mood
is very much dominant among traders and this can cause a little
pullback," said Naeem Aslam, chief market analyst at Ava Trade.
"Having said that, the fundamentals are still strong and any
pullback could only be a small correction before the big uptrend
Favourable fundamentals include inventory levels in
LME-registered warehouses, which, at 158,050 tonnes, are at
their lowest in nearly six years. MCU-STOCKS
Doubts about the outlook for European demand remain, with
recent data from Germany pointing to a soft patch.
German exports and imports dropped much more than expected
in May, coming on the heels of other soft indicators that have
signalled Europe's largest economy is losing momentum.
Potentially easing supply curbs for copper, Freeport-McMoRan
Copper & Gold Inc agreed a memorandum of understanding
with Indonesia on contract renegotiations, officials said, as
both sides look to end a six-month dispute that has halted
Aluminium closed up 0.78 percent at $1,939 a tonne
after touching a peak of $1,950, the highest since June 7, 2013.
Lead ended up 1.1 percent at $2,217 a tonne and
nickel jumped 2.4 percent to $19,775.
Tin bucked the trend, sliding 0.77 percent to close
at traded at $22,500.
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
(Additional reporting by Melanie Burton in Sydney; Editing by
Dale Hudson and Louise Heavens)