Zinc settled up 1.98% at 126.50 as demand is on the rise. LME inventories dropped more than 35% year-to-date, while global markets recorded a 17,000 deficit in 2013, according to the ILSZG report. Improving global demand prospects are helping support prices for zinc and aluminium in particular, led by stronger than expected consumption and tight supply - at least in the first half. Chinese zinc demand is seen growing by 8 percent this year, the fastest since 2010, driven by auto sales. It is expected to push the market into a deficit for the first time in several years. The U.S. macro economy is much closer to a normal state than it has been in five years, a Federal Reserve official said on Monday, adding that weak labour markets and low inflation are supporting accommodative monetary policy. The PBOC lowered deposit reserve ratio overnight to boost market sentiment. LME zinc prices opened at USD 2,102/mt overnight, then surged to USD 2,145/mt at one point, a record high last seen in last February, and closing at USD 2,136.5/mt, up USD 36/mt or 1.71%. The rating agency S&P’s announced that it may raise the long-term rating for the US to “AAA” if it sees “additional evidence of bipartisan efforts that signal a lower degree of political brinksmanship around fiscal policy decisions, coupled with a general government debt burden decline more pronounced than we currently expect.” In China, the General Administration of Customs reported that the country’s trade surplus rose for a third month straight in May to USD 35.92 billion. Now Zinc is getting support at 124.5 and below same could see a test of 122.5 level, And resistance is now likely to be seen at 127.7, a move above could see prices testing 128.9.

Trading Ideas:

Zinc trading range for the day is 122.5-128.9.

Zinc ended with gains after PBOC lowered deposit reserve ratio overnight to boost market sentiment

Upbeat U.S. unemployment numbers released last week supported the commodity as well

Zinc daily stocks at Shanghai exchange came down by 603 tonnes.