Copper rose on Wednesday, on track for a fourth session of gains, following other financial markets higher after Germany's top court backed a euro zone rescue fund that could go a long way to solving the region's debt crisis.
Three-month copper on the London Metal Exchange rose 0.7 percent to $8,147 from $8,090 at the close on Tuesday.
It hit $8,170, its highest since May 8, just after Germany's Constitutional Court announced its approval for the country to ratify the euro zone's new 700 billion euro ($899.22 billion) rescue fund and budget pact, but gave parliament veto power over any future increases in the size of the fund.
German approval was crucial to boost the euro zone's crisis fighting powers and a key requirement for the European Central Bank's new plan to buy the bonds of struggling euro members.
The decision boosted European equities markets and the euro hit a four-month high against the dollar. A weaker dollar tends to benefit commodities priced in the US unit because it makes them more affordable for holders of other currencies.
A spate of negative data in the past few months has weighed on metals prices because of the implications for demand for industrial metals as economies faltered.
But investor mood has lifted in recent days. Big metals consumer China recently announcing a $150 billion infrastructure programme and Premier Wen Jiabao said the country was on track to meet this year's target for economic growth.
It also said it will pay export tax rebates faster and grant more loans to exporters, as well as increase export credit insurance to small companies, in the latest move to prop up growth in the world's second-largest economy.
With the Fed starting a two-day policy meeting on Wednesday, some investors are also hopeful that the US central bank will launch more easing policies this week, which would stimulate the economy and lift demand for industrial metals.
“We've now got a situation where the macro environment is beginning to turn more positive. Policy is becoming more positive for the base metals, so I think that is having the bigger influence on prices,” said Barclays analyst Gayle Berry.
“If we do get a big announcement from the Fed that the market perceives to be positive there is still further upside to metals prices.”
In a research note RBC said copper needed to breach $8,200 and $8,400 before it could make a serious push to $9,000 “where it's likely to run into...producer selling and the market will need more than fresh government stimulus for that to happen”.
LME Copper last hit $9,000 a year ago.
PRODUCER CUTS
LME aluminium rose 0.7 percent to $2,094 after hitting a session high of $2,099, its highest since May 3. It has jumped 14 percent since hitting the year's low of $1,827.25 per tonne in mid August, helped by news of production cuts.
Russia's United Company RUSAL Plc, the world's largest aluminium producer, said it would cut capacity by 3 percent by the year-end, as it grapples with weak prices and rising power costs.
Three-month tin rose 1.6 percent to $21,005 from $20,675 at the close on Tuesday, while zinc rose 1 percent to $2,037 f rom $2,017. Lead $2,150 from $2,128 and nickel was $16,942 from $16,825. - Reuters