LONDON (Reuters) - Copper hit a four-month high on Friday and was on track for a third straight week of gains as investors bet Greek debt talks would soon conclude and demand prospects remained bright following the U.S. Federal Reserve's pledge to keep rates low.
Benchmark three-month copper on the London Metal Exchange rose 0.68 percent to $8,648 a tonne by 1118 GMT from $8,590 at the close, having earlier reached a high of $8,679.50. The metal is headed for a 5 percent increase this week and a 13 percent jump this year, following a 21 percent drop in 2011.
Federal Reserve Chairman Ben Bernanke said this week the U.S. central bank was ready to offer the economy additional stimulus after it announced it was likely to keep interest rates near zero until at least late 2014.
"We still think the market will reach a peak into April. It's never happened in history that you have the Federal Reserve and the European Central Bank competing over who is pouring more liquidity into the market," said Gianclaudio Torlizzi, an analyst at T-Commodity.
He added, however: "There's a question mark over what the Chinese will do from next Monday. The Chinese buy copper from around $7,000 to $7,500 a tonne, when they see an 8 in front of copper they don't buy."
The Shanghai Futures Exchange is closed this week for the Lunar New Year holiday, and investors meanwhile were awaiting U.S. data on fourth-quarter economic growth due later in the day for further clues on demand prospects.
Sluggish demand from China, as well as a recovery in supplies and an uncertain economic outlook for the global economy, are set to weigh on copper this year, a Reuters poll showed.
IMMINENT
In the wider markets, world stocks were steady near a 5-1/2 month high as investors anticipated an imminent conclusion to Greek debt talks, while lower Spanish bond yields and a fall in Italy's six-month borrowing costs also supported the euro.
A strong euro makes dollar-priced metals cheaper for European investors.
EU Economic and Monetary Affairs Commissioner Olli Rehn said talks with private creditors on restructuring Greek debt were "very close" to closing, though investors were growing jittery that Portugal may require another bailout.
On the supply side, meanwhile, the latest readings point to continued tightness in copper. LME inventories fell by 2,450 tonnes to 335,425, their lowest since September 2009.
"The outlook for industrial metals is now definitely improving as the combination of low interest rates and stabilizing economic growth is supportive for more cyclical sectors," said Credit Suisse in a note.
But it voiced concerns over China, the world's top copper consumer: "Next week's focus is likely to shift to China. We should get more indications whether Chinese inventories rose just as a result of restocking ahead of the Chinese New Year or because of a slowdown in demand."
In industry news, Anglo American posted a rise in quarterly output for its key commodities, with iron ore up and copper boosted by a ramped-up Los Bronces mine in Chile.
In other metals traded, soldering metal tin rose 1.23 percent to $24,300 a tonne from $24,005, while zinc, used in galvanizing fell 0.50 percent to $2,194 a tonne from $2,205.
Battery material lead fell 0.32 percent to $2,317.50 a tonne versus $2,325, while aluminium rose 0.26 percent to $2,282 from $2,276, and stainless-steel ingredient nickel rose 0.12 percent to $21,625 a tonne from $21,600.
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