Metals erase earlier losses

Mumbai, May 17 | Updated: May 18 2006, 05:30am hrs
Base metals gained for a second day in the Indian market after prices rose in London on speculation that demand from China will underpin a rally in metal prices. Gold and silver also rose. However, the volumes traded were lower for almost all metals on Wednesday as compared to that of Monday post-fall.The sharp rebound in metals also contributed to the 344 point surge in the BSE Sensex.

The recovery in prices, following a decline on May 15, fuelled speculation metals may climb to new peaks. Copper almost tripled in the past year and aluminum jumped 74% as China increased its use of raw materials and investment funds bought commodities seeking better returns than stocks and bonds.

Gold rose and traded above $700 level, resuming a rally that took the metal to a 26-year high last week, as the dollar traded close to a one-year low against the euro, making the precious metal more attractive as an alternative investment. Bullion, which fell the most since 1993 two days ago in London after a nine-week rally, has gained 36% this year while the dollar declined 8.8% against the euro. The dollar on Wednesday weakened on expectations the US Federal Reserve will pause its interest-rate cycle after 16 straight increases. Gold for immediate delivery gained as much as $26.30, or 3.8%, to $716.70 an ounce, in London.