US copper futures closed with strong gains on Thursday after a vigorous round of fund buying set off automatic buy orders and sent contracts to new highs, traders said.
"The funds kicked in and we got one of those sprawls where it just goes crazy with a lack of concrete sellers. It was very thin and a lot people thought there would be more of the selling we've seen all week," one copper dealer said.
"So the funds got the market spooked, ran some stops, and now we're up again in a hurry," he added. The Comex division of the New York Mercantile Exchange's copper contract for December delivery closed at $1.8715 a lb., up 4.0 cents, and set a new contract high at $1.8750 during the session.
Spot November jumped 3.95 cents to finish at $1.9650 a lb., after surging to a contract peak at $1.9650. On a continuation contract basis, the all-time high for Comex copper was set on October 26 at $1.9890 a lb.
With the November contract expiring on the 28th, some players had been selling December copper holdings and moving them into March futures. On Thursday, March finished up 3.20 cents at its new contract peak of $1.8075 a lb.
Comex estimated final copper volume at hefty 23,000 lots, up from a solid 20,003 lots traded on Wednesday. Copper rallied in a round of fund buying along with both base metals in London and precious metals.
Some players thought the funds were buying tangible assets like metals as an inflation play after a huge jump in the US trade figures. "Right now it's one of those wacky markets.
Everyone is still fearful of inflation and reacting to the market accordingly," a trader said. The September US trade deficit came in at a record of $66.1 billion.
Soaring oil prices went a long way toward pushing the shortfall out to a gaping record amount. While some analysts said they thought rallies at the current highs seemed risky, others set new upside targets.
One chartist said he thought the breakout above $1.85 upper trading band on the December contract signalled a move to $1.90 before long. Helping prices was a drop in London Metal Exchange warehouse stocks by 1,025 tonnes to 66,450 tonnes on Thursday. Comex inventories remained unchanged at 3,690 short tons on Wednesday's daily report. LME three-month copper closed at $4,008 a tonne, but went on to set a new all-time high at $4,020 in after-market trading. London copper ended on Wednesday at $3,951.
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