Copper prices gained on Wednesday as the dollar weakened ahead of a US interest rate decision and after a stock market rally in major consumer China. A softer US dollar exchange rate against a basket of currencies helped support metals markets after US consumer prices unexpectedly fell in August, which dented expectations of a rise in US interest rates. A little over half of economists in a Reuters poll believe the US Federal Reserve's monetary policy committee will hold fire on Thursday on raising interest rates for the first time in nearly a decade.
A weaker dollar makes dollar-priced metals cheaper for non-US investors. "The weaker dollar is helping ahead of the Fed meeting. Precious (metals) and crude (oil) are also up, they're all helping," a trader in Europe said. "But I don't think it's a sustainable rally."
Global shares rose ahead of the Fed decision while a drop in US crude stockpiles pushed up oil prices. In China share prices made their biggest advances in three weeks, helped by a spike in late trade. "We think the fourth-quarter (China economic) numbers will pick up as a result of the stimulus we've seen. We're coming to the end of a seasonal lull and it (stimulus) takes time ... to feed through to real demand for metals," Caroline Bain, senior commodities economist at Capital Economics, said.
"Whether the Fed hikes tomorrow or not, it's hard to see a massive reaction either way. We've had so much warning this year that the big move in the dollar could be behind us," she said. Three-month copper on the London Metal Exchange closed 0.6 percent higher at $5,380 a tonne. Prices have stalled since hitting seven-week highs last week, but they are up 10 percent since touching six-year lows last month.
Helping the metal, data showed copper stocks in LME-registered warehouses fell to 334,850 tonnes, their lowest in more than two months, with 21 percent of that metal unavailable because it has been booked for delivery. Cash copper is trading at a premium to the three-month price, indicating tight supplies. Also, a dominant position holder has between 50 and 80 percent of LME "warrants" or stock ownership titles. Lead ended up 2.8 percent at $1,734 a tonne, near parity with zinc, which gained 0.8 percent to $1,751. LME lead stocks are down 24 percent since late July, while zinc stocks are up 40 percent over the same period.
The global lead market had a deficit of 2,000 tonnes in July, while the global zinc market flipped into a surplus of 14,900 tonnes in July, industry data showed. LME nickel finished 0.5 percent firmer at $10,150, though the metal's fundamentals remain lacklustre as slow demand improvement in China feeds a feeble downward trend in LME inventories. Aluminium added 0.9 percent to close at $1,627 while tin failed to trade in closing open outcry activity and was bid up 0.7 percent at $15,655.