-LME closed for public holiday on Monday

LONDON: Zinc prices touched a two-week high on Friday and copper also gained as investors bought futures to square positions, though analysts said metals may resume their downward trend next week.

The metals market was swimming against a tide of a stronger dollar and weaker oil prices that would normally weigh on prices, but investors were keen to reduce their exposure further ahead of a long weekend.

Gains in metals were trimmed in the European afternoon after the dollar index extended its rise when US economic growth was revised upward for the first quarter.

“We’ve seen some more short covering and book squaring, I think that’s been the main driver ahead of the long weekend and the options declaration,” said Robin Bhar, head of metals research at Societe Generale in London.

The London Metal Exchange is closed on Monday for a public holiday, ahead of the options expiry on Wednesday.

Three-month zinc on the LME climbed 1.9 percent to an intraday peak of $1,911 a tonne, the strongest since May 12, paring gains to close up 1.2 percent at $1,899.

Zinc, which rose 2.2 percent on Thursday, is the best performing LME metal so far this year with gains of 18 percent based on concerns that weak output will create shortages.

This trend got support from data on Friday showing Chinese zinc production fell 2.5 percent year-on-year in April.

Some analysts had been concerned that a surge of Chinese output in March might trim an expected global deficit and raise questions about the bullish consensus.

LME copper ended 0.7 percent firmer at $4,695 a tonne after small gains in the previous session.

Supporting prices was a 14 percent weekly fall in copper inventories in warehouses monitored by the Shanghai Futures Exchange.

Recent gains on the LME may backtrack next week, however, as the market again focuses on the potential for an increase in US interest rates, Bhar said.

“I think we’ll see more of the same — dollar strength, good US data, bond yields inching higher and continued soft data out of China. So that leads me to believe we’ve got to be testing lower again.”

Also raising questions about the price outlook were concerns over faltering growth in top metals user China after profit growth at China’s industrial firms slowed in April.

“I still have the opinion demand is in bad shape and if the dollar strengthens then that will be enough to push it lower,” said Dominic Schnider of UBS Wealth Management in Hong Kong.—Reuters