US copper futures rallied over 4 percent on Friday as institutional fund buying boosted prices to all-time record levels, while a break above $5,000 a tonne in London was seen adding to the momentum, sources said.
"I think the market got taken by surprise it was caught short and I think the move was a lot quicker than a lot of people thought," said one Comex dealer, adding that London's breach of $5,000 a tonne prompted the aggressive buying in New York.
The benchmark May copper contract ended 9.45 cents firmer at $2.36 a lb, on the New York Mercantile Exchange's Comex division, after posting a new life-of-contract peak at $2.3630, which eclipsed the previous February 7 contract high at $2.3145 a lb.
Analysts pegged next resistance in May copper at $2.45 a lb, while support was seen at the $2.34-$2.33 area, and then at $2.30. Spot March soared 10.25 cents, or 4.5 percent, to finish the day at $2.3690, after setting an all-time record for spot copper at $2.3710 in the session.
Comex final copper volume was estimated at 19,000 lots, almost double on Thursday's official 9,751 lots. Dan Vaughn, futures analyst at A.G. Edwards, believed the technical impetus for Friday's rally came from the higher close on Thursday in the face of a soft US housing report and bearish Chinese import figures.
"From a fundamental standpoint, I'm not sure a breakout to the upside is entirely justified given what we're hearing, so I do tend to think a lot of this was psychological and technical in nature," Vaughn said, adding that the market would probably see follow-through buying after the strength of the rally.
Failing to spook the copper market was a report on Thursday that China imported 39.3 percent less copper in the first two months of 2006 compared to a year.
"But, if we come in Monday and break back below $2.30, which does not seem entirely likely, we might have an ugly breakdown," Vaughn added. Meanwhile, all-time highs in copper and zinc on the London Metal Exchange (LME) were seen fanning the buying momentum in Comex copper, analysts said.
"A zinc advance into record territory, coupled with copper busting through $5,000 a tonne resistance, has emboldened the bulls," said Edward Emir, metals analyst with Man Financial. Three-month copper ended at $5,130 a tonne, up $200 from Thursday's kerb close.
In after hours, trading copper hit $5,160 on LME select. Zinc closed at $2,473, a $98 gain from Thursday, and over 30 percent higher since the start of the year. Additional support was seen from the ongoing violent protests, demanding the closure of a giant mine run by US firm Freeport-McMoRan Cooper & Gold Inc.
The Freeport operation has drawn frequent criticism over its impact on the environment, the share of revenue going to Papuans and the legality of payments to Indonesian security forces that help guard the site.
On the supply side, LME copper warehouse stocks fell 1,800 tonnes to 131,450 tonnes on Friday, which seemed to offset a rise in Shanghai stocks. Shanghai copper stocks rose 1,917 tonne rise to 41,505 tonnes as of March 16.
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