Copper futures retreated from their highest levels in 33 months on Friday as investors locked in profits from a rally and adjusted positions before a long weekend. "I think we're seeing some profit-taking and book-squaring ahead of the holiday weekend," a trader said.
Monday is a market holiday in Britain and the London Metal Exchange will be closed. Metals fell into the red across the board after analysts said industrial metals prices needed to take a breather after the LME index of six metals gained 18 percent since early June.
"I share the view that copper is over-extended and that a correction is due, but every correction needs a trigger," said Julius Baer commodities research analyst Carsten Menke in Zurich. One trigger could be a rebound in the dollar and the other would be a confirmation that economic growth in top metals consumer China was due to slow down in coming months, he added.
Three-month LME copper closed down 0.3 percent at $6,666 a tonne, erasing gains after having touched $6,747, its highest since November 2014. Copper was earlier boosted when weekly copper stocks in warehouses registered by the Shanghai Futures Exchange declined by 8.2 percent to 187,444 tonnes, data showed on Friday.
On-warrant inventories - those not earmarked for removal - in London Metal Exchange (LME) depots have halved to 112,950 tonnes over the past six weeks. LME benchmark aluminium slid 1.7 percent to finish at $2,070 a tonne after LME inventories continued to rise. On-warrant stocks have gained 101,725 tonnes, or 10 percent, in about two weeks.
The LME "tom-next" spread for aluminium, which is the cost of borrowing metal for a day and often a flashpoint for positioning tension, flared to a $10 backwardation. The recent rally in implied options volatility has made buying options expensive but provided an opportunity for relative-value plays, such as buying LME aluminium calls and selling SGX iron ore calls, Citi analyst Daoyuan Zhou said in a note.
LME nickel ended down 2.2 percent at $11,485 despite news that lawmakers in the Philippines, the world's top nickel ore supplier, filed a bill to ban mining in watershed areas and halt exports of unprocessed ores. LME zinc dropped 1.8 percent to close at$3,063.50, lead fell 1.4 percent to $2,325 and tin shed 0.8 percent to $20,325.
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