By Susan Thomas
LONDON (Reuters) - Lead prices fell on Wednesday as investors took profits after a rally this month, but a brighter global economic outlook is seen providing support to industrial metals.
Investors have bought beaten down assets like lead, zinc and aluminium on prospects that the economy is slowly improving and that supply will diminish as demand increases.
Fund buying helped push aluminium and zinc prices to the highest levels in nearly 18 months and three years respectively in July, while lead hit a 17-month top on Tuesday.
"The main reason why these metals prices have moved higher has not been a change in fundamental conditions, it's been a change in investment behaviour. Part of that is driven by improving macro sentiment," said commodity analyst Ivan Szpakowski of Citi in Shanghai.
Three-month lead
LME zinc
Zinc has risen on forecasts that falling mine supply will lead to a shortage of metal.
"The moves look technically driven, with no change in fundamental issues to speak of," ANZ Research said in a note to clients.
"While sell-offs like this will not be uncommon, the macro environment remains accommodative for further gains in base metals prices over the coming weeks."
Manufacturing growth in top metals consumer China expanded at its fastest clip in 18 months in July, an initial survey showed.
In the United States, economic growth accelerated more than expected in the second quarter and the decline in output in the prior period was less steep than previously reported, bolstering views for a stronger performance in the last six months of the year.
The U.S. Federal Reserve will issue a policy statement on Wednesday after a two-day meeting. The central bank looks certain to press forward with its plan to wind down its bond-buying stimulus, and could offer some vague clues on how much nearer it might be to finally raising interest rates.
"A positive outlook by the Fed could help sentiment among the traders which could help industrial metals recover some of their losses," Naeem Aslam, chief market analyst at Ava Trade, said.
In other metals, copper
PRICES Three month LME copper
Most active ShFE copper
Three month LME aluminium
Most active ShFE aluminium
Three month LME zinc
Most active ShFE zinc
Three month LME lead
Most active ShFE lead
Three month LME nickel
Three month LME tin
(Additional reporting by Melanie Burton in Sydney; Editing by William Hardy and David Evans)