Technical selling in London Metal Exchange (LME) zinc on Thursday afternoon spread to the rest of the complex, with prices lower across the board by the close, traders said. "Zinc has led the pitch. People were taking profits this morning. It's been happening for the last 36 hours or so, and it finally gave up the ghost and tumbled lower," one LME dealer said. "I think all the metals will see more selling on Friday," he added.
Zinc fell nearly five percent to close $68 lower at $1,371 a tonne, while aluminium was 1.45 percent down and copper was softer by 0.8 percent.
"It (the broader market) has not really followed through on the upside this week, so it is looking a bit vulnerable and nervy. I am wondering if some money has been taken off the table," a second trader said. On Wednesday zinc set a fresh 7-1/2-year high of $1,450, and copper made a record peak of $3,307 on LME Select.
"This is a blip in my view. Nothing has changed significantly. I think this is a short-term downturn in sentiment," Barclays Capital analyst Ingrid Sternby said.
"I think a few impatient longs have sold out of their positions, but the trend remains to the upside."
She added that zinc would find support between $1,350 and $1,370.
Despite Thursday's fall, analysts still expected metals to continue to attract big cash inflows from funds, given record high oil prices, falls in global stock markets after a General Motors profit warning, dollar uncertainty and the prospect of robust industrial demand.
"The latest move higher...was on the back of renewed speculative buying interest from China, which is generally a pretty good sign," Sternby said.
"Fundamentals overall have been positive and that will support an upward trend in copper prices. There is potential for a near-term correction beyond what we have seen today, but generally speaking, I think we will definitely see fresh highs in copper," Sternby said.
Copper closed $27 lower at $3,265, while aluminium was $29 off Wednesday's close, at $1,969.
Tin attracted no interest, but was indicated $100 softer at $8450/550 and nickel was down $150 at $15,850. Lead dropped $12 at $950.