A weaker dollar helped propel aluminium to peak above its 50-day and 100-day moving averages on Wednesday, gaining 1.8 percent and closing the day at US$2,177.50 per metric ton.
Softness in the greenback motivated increased investments in metals across the board, as investors sought to protect against value erosion explained Societe Generale analyst Robin Bhar.
“Risk-on sentiment has clearly come back into vogue and commodities are clearly risk-on,” he told Reuters.
Sucden trader Liz Grant noted that higher prices triggered pre-set buying orders, adding to the upward push in prices.
The late rebound was in stark contrast to earlier in the week, when prices dropped to US$2,112.50 per metric ton upon the news of a spike in LME-registered warehouses. Aluminium on hand rose by over 200 thousand metric tons to a total of just under 1.3 million metric tons. Chinese inventories connected to the Shanghai Futures Exchange followed suit, reaching all-time highs late last week.
Commerzbank analyst Daniel Briesemann warned that the glut in aluminium in warehouses may push prices back below US$2,000 per metric ton.
“There is obviously ample supply of aluminium in China and therefore scope to export at least some of that material.”
Analysts also cautioned that there continues to be around 7 million metric tons in stockpiles outside exchange warehouses globally, accumulated due to market surpluses. However, Europe offers hope for a home for this excess, as data shows Germany, home of Europe’s biggest economy, is expected to experience strong and steady growth in the months and years ahead.