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METALS-Zinc hits two-month high as technicals trigger buying

* Zinc breaks 200-day moving average

* Historically low zinc inventories offer price support (Updates with closing prices)

LONDON, Jan 20 (Reuters) - Zinc prices rose to two-month highs on Monday after a break of key technical levels triggered a flurry of buying and as the market worried about historically low inventories.

Benchmark zinc on the London Metal Exchange (LME) ended 0.6% up at $2,444 a tonne.

Prices of the metal used to galvanise steel earlier touched $2,448, the highest since Nov. 13 and a gain of more than 10% since early December.

“The 200-day moving average around $2,440 gave way and started the short-covering,” one zinc trader said, referring to the closing of bets on lower prices. “It does pave the way for $2,500-$2,550, but that may need a lot more momentum.”

TECHNICALS: Strong resistance is seen at $2,480, a Fibonacci retracement level, while any reversal of the uptrend will only see support kick in at about $2,350, where the 21, 50 and 100-day moving averages are converging.

STOCKS: Stocks of zinc in LME-approved warehouses are close to 20-year lows at about 50,000 tonnes, having been on a downtrend since October 2015.

Visible inventories - including those on the LME, in warehouses monitored by the Shanghai Futures Exchange and those held by producers - are estimated at about 1.1 million tonnes.

That number is also very low, equating to about 30 days of global consumption rather than normal 50 days.

Global consumption is estimated at 14 million tonnes this year.

DEMAND: The China Iron and Steel Association recently forecast Chinese steel demand of about 890 million tonnes for 2020, up 2% from 2019.

SPREADS: Worries about nearby availability of zinc on the LME market have pushed cash metal to a premium of nearly $20 a tonne over the three-month contract, having been at a discount in December.

CHINA: Prices of industrial metals overall were supported by expectations of stronger demand from top consumer China, where data shows growth and demand stabilising, and optimism about improving U.S-China trade relations.

Chinese industrial output in December rose 6.9% from a year earlier, its strongest growth in nine months and above an expected 5.9%. Fixed-asset investment rose 5.4% for the full year, but growth had plumbed record lows in the autumn.

“We see scope for stabilisation in China and a de-escalation of the trade dispute,” Bank of America Merrill Lynch analysts said in a note, adding that this and a lack of mine supply growth is likely to support copper.

OTHER METALS: Copper closed 0.2% down at $6,259 a tonne, aluminium was up 0.4% at $1,812, lead lost 0.8% to $1,961, tin gained 0.2% to $17,850 and nickel added 0.8% to $14,025. (Reporting by Pratima Desai Editing by Kirsten Donovan and David Goodman)