By David Hodari
Copper prices continued to tick higher Tuesday, as investor optimism on the Chinese economy lifted the base metal to fresh three-year highs.
The price of copper was up 0.28% at $6,942.50 a metric ton in midmorning trade in London.
Gold, meanwhile, slipped 0.25% to $1,331.20 a troy ounce, with a lack of fresh developments in North Korea's war of words with the U.S. allowing investors to take a little profit and inch prices away from the 11-month highs hit Monday.
Continued speculative optimism around the Chinese economy continued to take copper higher, said Ole Hansen, head of commodity strategy at Saxo Bank.
"From a long-term perspective, it's the same drivers, with China's clean-air policies and a stronger yuan versus the dollar seeing the market taking aim at the $7,250 [London Metal Exchange] resistance level, " Mr. Hansen said.
Better-than-expected Chinese economic data and the government's environmental policies aimed at limiting air pollution caused by industrial metals smelting have boosted base metals prices in recent months. Investor bets that copper's price would continue to rise hit their highest level since March 2004 on Monday, according to Alastair Munro, a broker Marex Spectron.
A weaker dollar has also supported metals prices. The WSJ Dollar Index, which measures the currency against a basket of 16 others, has dropped 3% in the past three months. A stronger yuan makes it cheaper for Chinese investors, who accounted for approximately half of global copper demand in 2016, to buy dollar-denominated base metals.
Copper's rally may be running out of steam, though. Those rising long positions leave the red metal vulnerable to profit-taking, Société Générale said in a note.
"There are warning signs: momentum is just too strong and prices don't look justified right now. Calling a top is difficult, but the rally will fade when we close in on that [$7,250] resistance level and investors start to take profit," Saxo Bank's Mr. Hansen said.
Looking ahead, investors were closely watching the European Central Bank's monetary policy statement and press conference, scheduled for Thursday, for any currency-moving statements. Chinese import, export, and trade balance data, due out on Friday, will also be of some interest.
Among precious metals, silver fell 0.39% to $17.84 a troy ounce, palladium rose 0.05% to $980.50 a troy ounce, and platinum fell 0.62% to $1,002.50 a troy ounce.
Among base metals, zinc fell 0.36% to $3,198.50 a metric ton, aluminum fell 0.12% to $2,115 a metric ton, tin fell 0.15% to $20,760 a metric ton, nickel fell 0.57% to $12,210 a metric ton, and lead fell 0.19% to $2,388.50 a metric ton.
Write to David Hodari at [email protected]