Zinc settled up 1.13% at 129.40 to the highest in almost 16 months in London on concern that production will fail to keep up with demand amid supply curbs and shrinking inventories. Stockpiles tracked by the London Metal Exchange have dropped 28 percent this year to the lowest since December 2010. Tokyo-based Toho Zinc Co. said last month it will cut output of semi-processed ore at its Australian mines. Supply of the refined metal trailed demand in the first four months of 2014, the International Lead and Zinc Study Group said this week. The Chinese Premier Li Keqiang revealed during a visit to Britain that the central government would ensure a 7.5% economic growth this year. Meanwhile, the US Federal Reserve signaled at the mid-year interest rate meeting that it would stick to accommodative monetary policy in the long run. In response, base metals prices recouped early losses during European and US trading hours, and went up. US initial jobless claims for last week were reported at 312,000, below the estimated 314,000. The Conference Board’s leading economic index rose by 0.5% MoM in May, beating April’s 0.4% increase. The Philadelphia Fed’s manufacturing index also jumped to 17.8 in June, faring better than May’s reading and expectations. Base metals markets should continue to digest optimistic statements made by the Chinese Premier, and a weaker US dollar is also expected to lend some support to the markets on Friday. Technically market is under fresh buying as market has witnessed gain in open interest by 16.39% to settled at 3493 while prices up 1.45 rupee, now Zinc is getting support at 127.9 and below same could see a test of 126.3 level, And resistance is now likely to be seen at 130.3, a move above could see prices testing 131.1.

Trading Ideas:

Zinc trading range for the day is 126.3-131.1.

Zinc rose after recent data showed a rising market deficit, and investors expect the figure to grow further as major mines shut down.

The global zinc market was in a 107,000 tonne deficit in January to April, versus a deficit of 17,000 tonnes in January-March.

Stockpiles tracked by the London Metal Exchange have dropped 28 percent this year to the lowest since December 2010.