Copper prices climb as low inventories precede US inflation data

Copper prices staged a recovery on Tuesday, bouncing back from last week's 3.7% decline, driven by a decrease in inventories as investors awaited crucial U.S. inflation data to gauge potential interest rate adjustments.

At 1106 GMT, three-month copper on the London Metal Exchange (LME) surged by 0.8% to reach $8,298 per metric ton, rebounding from a three-month low of $8,127 recorded on February 9.

With China observing the Lunar New Year holidays, attention in the copper market, as well as other industrial metals, turned to today's U.S. inflation figures. Analysts, including Ewa Manthey, commodities strategist at ING, see these data as pivotal in offering insights into the future direction of the Federal Reserve's monetary policy.

The strength of U.S. interest rates continues to bolster the U.S. dollar, consequently driving up the costs of dollar-denominated metals for buyers using other currencies and casting a shadow on investor sentiment towards growth-dependent commodities.

The eagerly anticipated U.S. January inflation data is scheduled for release at 1330 GMT.

Despite its pivotal role in energy and construction, copper has faced a 3.6% decline this month, primarily attributed to concerns over dwindling demand from China, its largest consumer, particularly within the property sector.

From a technical standpoint, copper has managed to breach its 100-day moving average resistance at $8,294, setting its sights on the next resistance level at the 200-day moving average of $8,339.6.

Recent data from the LME suggests a tightening copper market, with copper stocks in LME-registered warehouses hitting their lowest levels since September following an outflow of 850 tons. Conversely, lead stocks continue to climb to a six-year high, while zinc stocks reach their highest level in two and a half years.

Among other base metals, aluminum on the LME climbed 0.5% to $2,238.5 per ton, zinc increased by 0.2% to $2,324, lead declined by 0.3% to $2,018.5, tin edged up by 0.1% to $27,330, and nickel rose by 0.6% to $16,130.