METALS-Copper bounces as investors seek inflation hedge

Recasts with prices at 1715 GMT

By Eric Onstad

LONDON, Feb 18 (Reuters) - Copper prices rebounded in London on Tuesday as investors sought hard assets to hedge against inflation, but gains were capped by a stronger dollar.

Three-month copper CMCU3 on the London Metal Exchange (LME) gained 0.8% to $9,467 a metric ton by 1715 GMT. The contract eased on Monday after touching its highest in three months on Friday at $9,684.50.

"In my opinion it’s a money bid across the wider commodity space – most likely inflationary, hold-hard-assets related," said Alastair Munro, senior base metals strategist at broker Marex.

Investors were also watching the first talks on ending the war in Ukraine held by U.S. and Russian officials in Riyadh on Tuesday.

"War ending in Ukraine is really an energy story for Russia rather than a metal story. The metal flow out of Russia has never been fully shut down," said Tom Price, head of commodities strategy at Panmure Liberum.

Peace could result in normalising energy flows from Russia, which would be bearish, but it also could mean the prospect of recovery and sustained growth in aggregate demand globally, with the net result neutral to bullish, Price added.

Higher energy prices could lift other commodities since it is a key input, he said.

LME copper inventories extended gains in data released on Tuesday, rising to 263,775 tons for an 11% increase since last Wednesday.

Capping gains was a stronger dollar .DXY, making dollar-priced commodities more expensive for buyers using other currencies.

Copper has also been pressured by a lack of clarity on potential U.S. tariffs on metals as investors seek to calculate how much duties will inflate prices on the U.S. Comex exchange.

U.S. Comex copper futures HGc2 dropped 1.7% to $4.59 a lb.

The premium for U.S. Comex copper HGc4 over the LME price fell to $748 a ton on Tuesday from $995 a day earlier.

In other metals, LME aluminium CMAL3 gained 1% to $2,670 a ton, zinc CMZN3 firmed by 0.7% to $2,891.50, lead CMPB3 rose 0.2% to $1,996, and nickel CMNI3 shed 0.6% to $15,395.

Tin CMSN3 climbed 0.4% to a four-month peak of $32,820 a ton on concerns about sliding supplies from major producer Indonesia and declining LME stocks.

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