Base metal prices rebounded on Tuesday following sharp falls in the previous session as industrial consumers bought the metal at lower prices.

Traders said prices were also pushed higher by commodity index funds, which tend to buy the underlying commodity futures on the last day of the month and on the first of the month. It is estimated that commodity index funds have about $80bn under management.

The three-month copper price, which sank almost four per cent on Monday, rose three per cent or $167 to $4,807 a tonne in late afternoon trade on the London Metal Exchange.

The three-month LME aluminium price gained $50 to $2,410 a tonne, retracing about two-thirds of its decline from the previous session.

Zinc prices jumped more than five per cent to $2,359 a tonne, and are now within about $60 of matching the record high reached four weeks ago.

“Any time the price falls steeply you see [industrial] consumers coming into the market and buying because they’ve been waiting for a long time for prices to fall. They’re therefore short of the metal. They have to buy,” said a London-based trader.

Gold prices were also firmer, adding $6 to $560.30/$561.20 a troy ounce on the day. Investment demand for gold in 2006 is likely to fall from last year’s strong levels, CPM Group, the New York-based commodities consultant, said in its 2006 yearbook on gold.

CPM forecast that gold prices would average $502.34 this year, compared with $446.42 in 2005. It said the rise in gold prices had stimulated more mining exploration and development. CPM projected a 6.1 per cent rise in gold mine output to 66.8m ounces.

The company forecast that fabrication demand for gold would fall 1.6 per cent this year to 81.3m ounces. It predicted that net central bank gold sales would fall to 13m ounces in 2006 from 20.3m last year.

IPE Brent for April delivery gained 53 cents to $61.52 a barrel in late afternoon London trade, while April West Texas Intermediate advanced 25 cents to $61.25 a barrel in early afternoon trade on the New York Mercantile Exchange.

Refined sugar prices in London rose more than three per cent to $451.1 a tonne after the International Sugar Organization forecast a global sugar deficit of 2.2m tonnes in the year to September 2006, up from its previous forecast in November of a 1.0 million tonne deficit.

This forecast is still below the estimated 3.7m tonne deficit of the 2004/2005 year. The ISO estimated 2005/2006 global sugar output at a new record high of 148.97m tonnes, up from 144.26 million the previous year.

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