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London metals seen lower after funds take profit

LONDON: Metal markets were battered by profit taking on Tuesday, ruining the hopes of a growing band of base metals bulls who had expected the previous week's gains to last.

"Short term it's looking rather gloomy unless we do get some producer cutbacks," said metals analyst Alan Williamson at Deutsche Global Mining Group in London.

Investors took profits after Monday's losses centred around the failure of major copper producer BHP to feed the market with a significant output cut, and analysts said new lows loomed for industrial metals.

Copper for three months delivery hit a trough of $1,380 a tonne on Tuesday, down 6.8 percent compared to Friday's peak of $1,480. The 12-year low at $1,371 was the next target, according to dealers.

Other base metals retraced from last week's mainly technical gains boosted by investment funds who were covering large speculative short positions.

Zinc lost around five percent during the day and nickel was down more than 2.5 percent while and tin also came under pressure.

"The technicals were pointing up last week, now they are pointing down," said Williamson.

Fundamentals remained bearish and would continue to undermine price gains until supply cuts were made to eroded gluts, particularly in copper and aluminum, analysts said.

Higher prices were a probability for later on in the quarter, based mainly on short covering, but the peaks would be lower due to this week's retracement, Williamson said.

Gold also, suffered, fixing at a six-month nadir after silver dropped close to $5.00 support.

World commodity markets have seen their lows but are not ready for a true bull run, broker GNI said in its April financial review.

"I do not doubt the fact that we are seeing a turnaround in the world commodity market," said GNI commodity analyst Lawrence Eagles.

The Commodity Research Bureau and Goldman Sachs commodity indices had both turned higher as oil, grain and aluminum markets steadied.

But commodity markets generally lacked the low stock levels and strong global growth needed to drive a bull run, GNI said.ÑReuters