METALS-Copper gains outstrip fundamentals-traders

* Gap between prices and fundamentals getting bigger * Several factors could trigger correction By Pratima Desai LONDON, Aug 26 (Reuters) - Copper rose on Wednesday as economic and demand hopes fuelled investor buying, but analysts say prices have climbed above levels supported by fundamentals. Other industrial metals followed including lead, which surged to a 1-year high of $2,110 a tonne on worries about supplies from China, after a spate of smelter closures because of pollution. Three-month copper on the London Metal Exchange was trading at $6,378 a tonne at 0948 GMT from $6,311 on Tuesday. The metal used in power and construction has more than doubled since last December when prices fell below $3,000 a tonne. Large price gains since early April have been triggered by signs of economic stabilisation, expectations of a strong demand recovery and stockpiling by the government and users in China, the world's largest consumer. "It's economic optimism ... We're seeing the effects of the fiscal rescue packages and other things like infrastructure projects" said Eugen Weinberg, analyst at Commerzbank. "The difference between fundamentals and prices is getting bigger and bigger day by day ... It's difficult to see where the catalyst could come from, but when it does we could see a huge slump in prices of industrial metals." Factors that could set off a major correction include a much stronger dollar, which makes metals priced in the U.S. currency more expensive for holders of other currencies, weak economic data or signs that Chinese growth and demand could be faltering. One other thing that could prompt a price reversal is stocks of copper in LME warehouses, which are up about 15 percent since the middle of July to 296,400 tonnes. "If we see suddenly see a big jump in stocks, all the euphoria will vanish," a London-based metals trader said. He added that any reversal could quickly see a lot of copper come on the market, especially from Chinese households, which are said to be hoarding up to 200,000 tonnes of the metal. LEAD POISON Aluminium was at $1,921 a tonne from $1,900. The metal used in transport and packaging has gained from concern about lack of nearby availability because of financing deals which have tied material up until next May. But weighing on sentiment were comments by China's top producer, Aluminium Corp of China (CHALCO), which said privately held stocks in the country totalled 500,000 to 600,000 tonnes. Zinc was at $1,870 a tonne from $1,852, tin at $14,100 from Tuesday's last bid at $13,990, nickel at $19,600 from $19,355 and lead at $2,105 from $2,061. Battery material lead has been boosted this week by a lead poisoning scandal and smelter closures in China. "Tightened domestic availability of lead is likely to put a floor under prices as the global market is balanced and inventories are relatively low," Calyon said in a note. The news has also reinforced some expectations that the lead market will probably see a deficit this year. Metal Prices at 0949 GMT Metal Last Change Percent Move End 2008 Ytd Percent move COMEX Cu 285.40 0.00 +0.00 139.50 104.59 LME Alum 1918.00 18.00 +0.95 1535.00 24.95 LME Cu 6379.00 68.00 +1.08 3060.00 108.46 LME Lead 2109.00 48.00 +2.33 999.00 111.11 LME Nickel 19500.00 145.00 +0.75 11700.00 66.67 LME Tin 14035.00 -415.00 -2.87 10700.00 31.17 LME Zinc 1869.00 17.00 +0.92 1208.00 54.72 SHFE Alu 15030.00 50.00 +0.33 11540.00 30.24 SHFE Cu* 50020.00 620.00 +1.26 23840.00 109.82 SHFE Zin 15350.00 130.00 +0.85 10120.00 51.68 ** 1st contract month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07