* Hopes of strong China demand after holiday also help * LME copper stocks jump 14,800 tonnes to 439,425 tonnes * LME aluminium stocks rise above 2.7 million tonnes to record (Adds details, updates prices) LONDON, Jan 26 (Reuters) - Copper rose almost 4 percent on Monday as gold's rally to a three-month high encouraged buyers and on hopes that Chinese demand will be strong after the Lunar New Year holiday. Three-month copper on the London Metal Exchange rose 3.5 percent to a high of $3,365 a tonne. At 1128 GMT it traded at $3,347 a tonne from $3,251 at the close on Friday. "Gold has broken higher in the last day or so which might encourage more volatility across commodities," Dan Smith, analyst at Standard Chartered, said. Gold climbed above $900 an ounce to its strongest level in more than three months, lifted by interest in bullion as a haven from risk. Volumes across base metals were lower due to the Chinese holiday with trading expected to be volatile this week. "Metals prices have been strong in recent years through this period in anticipation of Chinese buying activity in the weeks following the new year celebrations," investment bank Fairfax said in a note. Copper prices have dropped more than 60 percent since a record $8,940 a tonne last July as the global economic slowdown hits demand. The metal touched a three-week low on Friday. RISING STOCKS Declining demand can be seen in rising stock levels with inventories on the LME jumping 14,800 tonnes to 439,425 tonnes, the highest level since December 2003. "At the end of a bearish week for base metals, short covering helped prices rally across the complex on Friday, despite some further significant increases in stocks of aluminium, copper and zinc," Macquarie said in a research note. Aluminium was steady at $1,349.75 from $1,342 a tonne even as LME stocks of the metal rose 19,225 tonnes to a record 2.71 million. Global unwrought aluminium stocks rose to 1.676 million tonnes at the end of December from November's upwardly revised 1.605 million, the International Aluminium Institute said. Output cuts by aluminium producers have failed to keep pace with the slump in demand and prices and the market expects further cutbacks to be announced. "The Chinese in particular are badly under water," said Standard Chartered's Smith, adding that average costs in China are estimated at about $1,800. "Traditionally they have been a bit more price sensitive than producers in the West," he said. China's primary aluminium production fell 18 percent in December from a year earlier, data from IAI showed on Friday. Nickel fell to a low of $11,400 from $12,100 a tonne. The metal rose as much as 10 percent on Friday. LME inventories rose 1,100 tonnes to 81,468 tonnes, the highest level since July 1995. "Nickel is the only one that hasn't seen dramatic increases in the last month," Standard Chartered's Smith said. "I think that's one of the reasons why nickel has picked up in the last few days as it's an indication that things have stabilised a bit at least in terms of inventories," he said. Lead rose to a high of $1,160 a tonne compared with the last bid of $1,115 on Friday, zinc climbed to $1,189.75 from the last bid of $1,160, while tin touched a high of $12,400 from $12,250 a tonne. Metal Prices at 1134 GMT Metal Last Change Percent Move End 2007 Ytd Percent move COMEX Cu 145.75 0.00 +0.00 139.50 4.48 LME Alum 1344.00 2.00 +0.15 1535.00 -12.44 LME Cu 3345.00 94.00 +2.89 3060.00 9.31 LME Lead 1147.00 73.00 +6.80 999.00 14.81 LME Nickel 11675.00 -425.00 -3.51 11700.00 -0.21 LME Tin 11925.00 -325.00 -2.65 10700.00 11.45 LME Zinc 1170.00 50.00 +4.46 1208.00 -3.15 SHFE Alu 11630.00 255.00 +2.24 11540.00 0.78 SHFE Cu* 25830.00 -590.00 -2.23 23840.00 8.35 SHFE Zin 10255.00 85.00 +0.84 10120.00 1.33 ** 1st contract month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07

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