Three-months copper futures on the London Metal Exchange (LME) dropped over three percent on Monday as technical selling picked up late in the day, dealers said.
"The 10- and 30-day moving averages have nearly crossed. We haven't seen that since May 2005 and people are selling on that technical weakness," an LME trader said. Copper was $160 softer at 1738 GMT after ending open-outcry trading on Monday at $4,870 a tonne. Copper closed on Friday at $4,960.
"Copper looks potentially under threat. I think we may test $4,650 and if that doesn't hold, we could see copper at $4,400 and then $4,000," the trader said.
But fundamentals remained buoyant with physical copper premiums in Europe up 30 percent from the start of the year on strong demand and limited stocks.
Demand for copper, used in electrical and electronic applications and in construction, was expected to be strong elsewhere too.
Last week, Barclays Capital said that copper consumers who attended a seminar in China, which consumes around 20 percent of world supply, had reported long order books and limited stocks of products and copper cathode.
"We continue to recommend buying into price weakness. The supply-demand situation has not deteriorated. This is probably just weakness due to liquidation in thin conditions," Barclays Capital analyst Ingrid Sternby said.
She added that she expected prices to beat last month's record $5,100-a-tonne peak.
Weighing on sentiment was a steady reduction in the net speculative long position in US COMEX futures. By February 21, the net speculative position was short for the first time since early May 2003.
Most other metals were down between one and two percent from Friday's levels.
Aluminium fell to $2,440 at the close, from $2,488. On Thursday aluminium and zinc were at parity for the first time since 1992, before aluminium pushed higher towards $2,500 on Friday.
"The raw material markets for both aluminium and zinc are very tight. Both metals are looking strong in terms of fundamental prospects and both prices deserve to trend higher," Sternby said.
Zinc closed at $2,327 against $2,358, but was cushioned by inventories falling 2,400 tonnes to 322,225 tonnes, the lowest since August 2001.
Lead slipped $15 to $1,203, but tin gained $25 to $7,950. Nickel dropped to $15,080 from $15,150.