Nickel in London Drops as Rally to 14-Month High Seen Excessive

May 01, 2014 2:47 am ET

May 1 (Bloomberg) -- Nickel declined as a technical indicator signaled to some investors that last month’s gains to the highest level since February 2013 were excessive.

The contract for delivery in three months on the London Metal Exchange retreated 0.7 percent to $18,200 a metric ton at 3:46 p.m. in Tokyo. The metal rose 15 percent last month, the biggest such gain since September 2012. Prices advanced for a fifth straight month, the longest rally since August 2009.

Nickel’s 14-day relative strength index has been above 70 since April 9, a level suggesting an impending drop to some analysts who study technical charts. Futures climbed 31 percent this year, the most among the six main metals traded on the LME, as Indonesia, the biggest nickel miner, banned ore exports in January. The price touched $18,715 on April 28.

“It’s a technical correction in thin trade as nickel has been overbought,” said Chae Un Soo, a metals trader at Korea Exchange Bank Futures Co. in Seoul. Other metals remained subdued on concern that demand will slow after China’s official factory output data missed estimates and the Federal Reserve reduced monetary stimulus, he said.

Markets in China, the biggest user, are closed from today for the Labor Day holiday and resume trading on May 5.

The Purchasing Managers’ Index was at 50.4 in April, the National Bureau of Statistics and China Federation of Logistics and Purchasing said today. That compared with March’s 50.3 reading and the 50.5 median estimate of 38 analysts in a Bloomberg News survey. Readings above 50 signal expansion.

A similar gauge from HSBC Holdings Plc and Markit Economics Ltd. released last week rose to 48.3, from 48, indicating China’s economy continued to stall in April. A final reading on the index is due May 5. The Fed cut its monthly bond purchases by $10 billion to $45 billion after a two-day policy meeting ended yesterday.

Copper in London was little changed at $6,639 a ton. The contract for delivery in July was little changed at $3.0255 a pound in New York.

Aluminum, tin, zinc and lead all declined in London.