SYDNEY, Jan. 11 -- Copper prices on the London Metal Exchange regained strength Monday, rallying 2.9% on the back of stronger-than-expected import data for China and a weaker dollar.
The LME was stronger across the board, with LME zinc up 3.6% and nickel up 2.8%. Spot gold prices and oil also resumed their uptrends, with gold jumping to a one-month high in early trading, up 1.8% at $1,158 a troy ounce and crude oil trading near 15-month highs.
China over the weekend reported December copper imports rising by a more-than-expected 27% compared with the previous month, to 369,368 metric tons according to preliminary customs data.
This together with the dollar setting three-week lows helped outweigh negative sentiment after a weaker-than-expected employment report from the U.S. Friday.
"It's all about China. If China wants more metal, then we'll rise on that," said a Hong Kong-based trader, adding the market appeared to have "forgotten" last week's wobble on news that China had slightly tightened monetary policy.
At 0213 GMT, LME copper for three-month delivery traded at $7,645/ton, up $185 on the Friday afternoon kerb, zinc was at $2,610/ton, up $90 and nickel traded at $18,349/ton, up $499. LME aluminum stood at $2,322/ton.
A key driver for LME price strength is the widening arbitrage between LME and Shanghai Futures Exchange prices, with SHFE last week trading at a $100-$110/ton premium to LME, encouraging imports.
Traders are also keeping an eye on cold weather in China, after heavy snowfall last week disrupted zinc and lead production in the western part of the country.
However, an annual commodity index reweighting may be a source of further volatility this week as positions are adjusted, traders said.
So far, market participants seeking to anticipate the reweighting--expecting copper to be sold--have been wrong-footed.
Despite last week's tumble, copper still finished up on the week.
LME zinc and nickel are also expected to experience selling pressure--with Monday's price rises running counter to those expectations.
The index reweightings are annual adjustments to allocations to individual commodities that take place to account for the changes in their value during the past year.
Gold, meanwhile, benefited from a strong close Friday. Prices broke through resistance at $1,140/oz in early trading, triggering buy signals. The dollar's slide to three-week lows against the euro helped gold hold gains.
"There's new money coming in, as investments are being reallocated. Gold's move is also being exacerbated by thin volume," said Investec head of trading Darren Heathcote.