why so cheap compared to rio it , page-32

positive outlook for base metals Investors pushing base metals to fresh peaks:
Sunday, 8 January, 2006, 10:35 AM Doha Time

LONDON: Industrial metals prices are performing strongly at the start of the year as investors and consumers have rushed to take advantage of a brief dip in prices, pushing copper to a new record peak on Wednesday.

Traders said a wobble in prices the previous day ignited the latest rally, but prices were further boosted by news that contract workers at the world’s biggest copper producer Codelco had begun a strike.

“It’s a new year, it’s new money and it’s new highs,” a senior LME trader said, adding that the first sniff of buying when prices dipped on Tuesday had sent people scurrying to cover their short positions.

Earlier news of a strong earthquake in the Gulf of California off the Mexican coast sent prices up another leg, although there were no immediate reports of damage.

During open outcry trade, benchmark copper futures on the London Metal Exchange rose to $4,554 a tonne, just off an earlier peak of $4,566 and up 2.6% from Tuesday’s closing price of $4,440.

The latest gains were matched by a rally in precious metals, with gold, platinum and silver scoring three-week highs, and a fresh infusion of investor money took oil to an 11-week high.

Mining shares were firm, although some earlier gains were pared.

Supply disruptions and China’s huge demand for metals lifted the price of copper, used widely in construction and electronic goods, by about 40% last year.
Ingrid Sternby, analyst at Barclays Capital, said renewed dollar weakness might also lift commodities.

“Last year, currencies weren't as big a driver for metals markets, but I think if we were now to see renewed dollar weakness, that together with all the strength in fundamentals would be very supportive,” she said.

The dollar hit a two-month low against the euro last week on growing expectations that the Federal Reserve might soon end its 18-month campaign of raising interest rates.

“Once again it seems as if the bulls are firmly in the driving seat and that any weakness is just seen as another excuse to buy some more. Now that funds have a new year ahead of them, it seems as if their boldness has been renewed,” William Adams, analyst at BaseMetals.com, said.

– Reuters