London 09/11/2010 - "Tangibility" was the buzzword on the LME on Tuesday as investors flocked to hard assets, pushing base metals higher across the board despite the strength in the US dollar. The soaring gold price fanned inflationary fears and renewed eurozone sovereign debt concerns also rattled the markets. Metals prices soared, with tin hitting a fresh all-time high at $27,500, copper trading within $100 of its all-time high and gold scaling new heights above $1,400 per ounce as investors sought safe havens. Copper volumes were especially high, with 9,500 lots traded by 10:45 GMT. Metals benefitted from a fresh flood of capital as speculators emerged from the woodwork, investors lost confidence in peripheral eurozone sovereign debt, tensions rise ahead of this week’s G20 meeting and supplies tighten further in some markets. Still, one LME floor trader attributed the high-speed rally to just one source: “Investment fund buying.” After months of hibernation, the European sovereign debt crisis reared its ugly head on Monday when the European sovereign CDX index, iTraxx SovX Western Europe, hit a fresh all-time high. The spread on 10-year bonds of Portugal over German debt has expanded to 444 basis points, the widest in 15 years, renewing fears about the PIIGS - Portugal, Ireland, Italy, Greece and Spain. Unanticipated comments from Robert Zoellick, president of the World Bank, also roiled commodities markets - he told the Financial Times on Monday that the “system should also consider employing gold as an international reference point of market expectations about inflation, deflation and future currency values.” Dennis Gartman, author of the Gartman letter, said: “Individuals and institutions are buying gold, not because it is manipulated downward, but because they are disturbed by the fiscal irresponsibilities they see in their governments fiscally and they want protection.” The US dollar has recovered all of last week’s post-QE2 losses, trading at 1.3931 against the euro on Tuesday. Investors around the world are being lured to the metals sector by the giant returns delivered over the past 18 months amid tepid gains in stocks and rock-bottom yields on government bonds. There are no macroeconomic data releases on Tuesday other than September’s wholesale inventory report, due at 15:00 GMT. COPPER WITHIN $100 OF ALL-TIME HIGH, TIN HITS FRESH ALL-TIME HIGH Copper hit a new 28-month high today, trading as high as $8,842 - within $100 of its all-time high of $8,940 hit back in 2008 - as the prospect of continued demand in China, coupled with increasing demand in the US triggered by fresh stimulus efforts, pushed prices up. Stocks fell a net 325 tonnes to 364,875 tonnes, the lowest level since October 12, 2009, while cancelled warrants rose 3,825 tonnes to 31,750 tonnes. While production has not yet been affected at the 535,000-tonne-per year mine owned by Anglo American and Xstrata, market participants speculate that a prolonged work stoppage could lead to a further tightening of the market. Collahuasi accounts for about 3.5 percent of global supply. Citigroup has also increased its copper price forecast for 2011, raising it 26 percent to $9,124.50 per tonne. Aluminium traded up $27 at $2,457, while inventories dropped 10,475 tonnes to 4,270,975 tonnes - the lowest since June 12 - and cancelled warrants rose 3,300 tonnes to 171,275 tonnes. Both zinc and lead rose above the $2,500 level, with zinc trading at $2,515, up $36, and lead trading at $2,537, up $33. Zinc will record a surplus of 233,000 tonnes this year and 161,000 tonnes in 2011, according to the International Lead and Zinc Study Group (ILZSG). “These estimates are probably too low, but this is hardly surprising given that member countries are represented mainly by producers,” analyst Angus McMillan said. “The simple fact is that no one knows how much is sitting in China.” Inventories of zinc fell a small 450 tonnes to 632,800 tonnes, while cancelled warrants also fell, down a net 200 tonnes at 38,400 tonnes. Lead, which traded up $56 at $2,560, saw inventories rise 225 tonnes to 203,100 tonnes, while cancelled warrants fell 275 tonnes to 8,200 tonnes. Nickel traded at $24,464, up $339. Inventories increased 462 tonnes to 129,678 tonnes, the highest since June 18. Tin, which traded up $755 at $27,350, also recorded a rise in stocks, up 595 tonnes to 13,450 tonnes. Steel billet was indicated at $518/522, while inventories and cancelled warrants remained flat for the fifth consecutive session at 51,025 tonnes and 7,085 tonnes respectively. Cobalt was indicated at $37,000/39,250, while molybdenum was indicated at $31,000/37,450. There were no inventory movements in the minor metals.

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