Copper falls to one-week low before late rebound

Copper fell to one-week lows on Wednesday as investors cut bets on higher prices due to growing doubts that this month's sizzling rally was built on solid fundamentals. Benchmark copper on the London Metal Exchange fell to a one-week low of $5,612.50 before ending up two percent at $5,825 a tonne, which traders said was partly due to oil's more than 7 percent gain to a one-month high above $50 a barrel.
The metal used widely in power and construction hit $6,045.50 on Monday, its highest since June last year. "Fundamentals haven't really changed ... speculative flows have been reversed," said Haitong Bank analyst Andrew Keen. "Exchange inventories of copper are flat, there is a lot more smelting capacity coming on, which could be bearish. People's interpretations of fundamentals have been following prices rather than the other way round." Copper is on course for a rise of nearly 20 percent this month, its largest since April 2006.
The trigger for November's rise was Republican candidate Donald Trump winning the US presidential election, which many expect could mean large amounts of infrastructure spending and higher demand for commodities. But analysts say that would only add modestly to global demand and that China, which accounts for nearly half of global consumption estimated at around 22 million tonnes, would remain the most important component.
Industrial metals were also boosted by Chinese funds and local retail investors because of the falling yuan. "Metals priced and sold in dollars are a hedge," one trader said, adding that copper could test Fibonacci support around $5,500 over coming days.
Weighing on metals was the potential for a cash crunch in China as yuan borrowing costs in Shanghai surged to a two-month high. Also undermining sentiment was regulators stepping in to curb speculation with position limits, higher margins and transaction costs. Metals markets were also keeping a close eye on an oil producers' meeting, which agreed a deal to curb output for the first time since 2008, and to Thursday's manufacturing surveys in China, which could give clues on future demand.
"The most bullish fundamental combination of outcomes - an Opec cut and a higher-than-anticipated Chinese PMI ... would further support and/or confirm a global cyclical improvement in growth," Goldman Sachs said in a note. Aluminium ended up 0.6 percent at $1,732 a tonne. Zinc slipped 0.3 percent to $2,702.5, lead gained 0.5 percent to $2,365, tin added 2.3 percent to $21,050 and nickel added 1.5 percent to $11,250 a tonne.