Copper hits highest in a week on Chinese hopes and soft dollar

LONDON: Copper touched a one-week high on Tuesday and other base metals also gained on speculative buying fuelled by technical signals, optimism about a rebound in China's economy and a weaker dollar.

Zinc, however, extended its decline on worries about rising supply from Chinese smelters ramping up output.

"It seems that the macro picture in China has improved recently, and also the market seems to think that the dollar might come off a bit in the days ahead," said Gianclaudio Torlizzi, partner at consultancy T-Commodity in Milan.

Driving the upswing in prices were Commodity Trading Advisor funds, which mainly use technical signals such as momentum, while macroeconomic funds remained wary and on the sidelines, Torlizzi added.

"The market is still a bit tricky. Everybody's long, but things may change pretty quickly. It's too early to think a bull run has begun for the base metals."

Benchmark copper on the London Metal Exchange rose 0.5 percent in official open-outcry trading to $6,506 a tonne after touching its highest since April 1 at $6,538.

* COPPER SPREAD: Cash LME copper's discount to the three-month contract closed at $15.25 a tonne on Monday, near its widest for nearly two months, indicating healthy supplies.

* ZINC SMELTERS: LME zinc, untraded in official rings, was bid down 1.2 percent to $2,870 a tonne after hitting its weakest since April 2. It was weighed down by fears that refined zinc supplies will surge after smelters and miners agreed to a sharp rise in treatment and refining charges.

"Current profits for the smelters are very high. This will push smelters to increase their utilisation rate," said Dina Yu, analyst at metals consultant CRU in Beijing, adding that Chinese smelters are earning record profits of as much as 3,000 yuan ($447) a tonne.

* ZINC STOCKS: On-warrant LME zinc inventories have gained 18 percent to 47,925 tonnes since touching record lows in late March, daily LME data showed on Tuesday.