US copper futures were sold heavily in a bout of fund-led long liquidation Friday, after a slide in crude oil prices undermined holdings in several commodity markets, traders said.
"The funds are liquidating long positions right now," said one floor broker.
At the COMEX division of the New York Mercantile Exchange, copper for December delivery tumbled 6.60 cents, or 3.68 percent, to $1.7270 a lb., after sliding to $1.7225 a lb., matching the low hit on October 3.
On Thursday, it set a new contract high of $1.8580. Spot October slipped 6.80 cents to a low at $1.8550 a lb., after reaching a record peak at $1.9670 on Thursday.
COMEX estimated 10 am volume at a hefty 10,000 lots. Oil prices slid to near three-month lows on Friday and took the steam out of overblown prices in the lofty copper market, which a day earlier had charged up to all-time peaks.
Some players had become wary that the uncharted regions reached by the red metal market, partly on inflation concerns, might have been overdone when oil retreated from its peaks. The initial selling caused others to join in the fray and stop-loss sell orders were triggered on the way down. Traders said they had expected a corrective sell-off several days ago, then several robust US economic reports revealed a housing market that defied expectations for a slowdown.
And on Thursday, the Philadelphia Federal Reserve released its October statistics on the regional manufacturing sector, which also came in with surprisingly strong gains.
Along with improved growth figures was a surge in the prices paid index, which caused jitters in several markets, as some analysts and investors have begun to fear inflation will accelerate while the global growth pace slows.
Despite the drop in oil prices, equity prices in Europe and in the United States fell on Friday as inflationary warning signs in both regions caused some nervous selling.
Some funds with broad investment criteria responded to similar macro-economic issues that undermined the stock market when deciding to unload long copper positions on Friday.
Their selling started a chain reaction among other players who decided to take profits at the still-high levels.
But other players believe copper fundamentals remain strong for at least the intermediate term, and plan to renew their purchases after the shakeout runs its course.
Some technicians said they see upside targets at $1.87 on the way to $1.90 per lb. for December copper.
On Thursday, London Metal Exchange warehouse stocks fell by 225 tonnes to 62,825 tonnes. At COMEX warehouses, copper inventories were unchanged at just 3,690 short tons on Wednesday.
LME copper warehouse stocks, whose low levels continue to underpin the market, were down again on Friday, declining 1,350 tonnes to 61,475 tonnes. COMEX copper inventories were unchanged at 3,690 short tons in Thursday's afternoon data.
London copper prices fell more than 5 percent to $3,760 a tonne, after hitting a record peak at $4,015 a tonne on Thursday. Three-months copper steadied around $3,815 a tonne, down from $3,950 at Thursday's close.