Copper closed lower on Thursday, despite an early six percent rally on the London Metal Exchange, as investors scaled back positions, dealers said.
"Funds took advantage of the rally this morning to reduce their positions and take some profits," a trader said.
Copper closed at $6,710 a tonne, down $90 from Wednesday's kerb close, after trading at $7,200 on electronic platform Select. Weighing on sentiment was a rising dollar and a report by the World Bureau of Metal Statistics that said the copper market was in surplus by 150,000 tonnes between January and April.
"The rally was essentially short covering in nature, then copper hit resistance and things started to come back down," a second trader said. "At the same time, the dollar reversed direction and took the wind out of the market...and the WBMS data came at an inopportune moment for the longs."
Aluminium was down $8 at $2,492. The outlook for aluminium was mixed amid worries that China's latest move to tighten credit may force smelters to raise sales in the futures market to obtain cash.
Sentiment was supported by comments by the world's largest aluminium producer, Alcoa Inc, which expects aluminium consumption to double over the next 20 years to 60 million tonnes annually. Zinc followed copper, rising five percent early, before drifting back to $2,980 by the close, $60 above the previous close.
Nickel was at $19,500, down $450 from the kerb, despite another stock fall and a cash-to-threes backwardation of $925/975 a tonne. "Nickel hasn't shown much strength. The stocks and backwardation are supportive, but technically the market needed to close above the 50-day moving average just below $20,000," the second dealer said. Lead traded at $960, up $25, and tin edged higher to $7,875/7,900.
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