New York copper futures began Friday's floor session with hefty gains from an overnight new two-month low, which held despite a US home sales report showed a larger-than-forecast slowing, traders said.
A drop in copper stocks provided support for copper futures, which later came off only slightly and fleetingly following a report showing the pace of US home sales slipped to its lowest since June 2003.
After Thursday's severe sell-off, bargain hunters grabbed prices in a rush to cover short positions at near-two-month lows, driving prices up about 3 percent ahead of a long US Memorial Day weekend. "I tend to think there was some short covering after the big breakdown yesterday. And a pretty darn big break over the previous few weeks as well," said Dan Vaught, futures analyst with A.G. Edwards in St. Louis.
Copper for July delivery rallied 9.15 cents, or 2.88 percent, to $3.2720 a lb on the New York Mercantile Exchange's COMEX division. In the pre-open, July copper slid to their cheapest level since April 2 at $3.1650, then rose to $3.28. Spot May copper added 8.65 cents to $3.27, a 2.72 percent gain. Back months gained from 5.95 to 8.75 cents.
COMEX estimated 10:00 am EDT (1400 GMT) copper futures volume at 5,649 lots, much less than 16,693 lots estimated at Thursday's close, as many players had already left for the weekend. As of May 23, open interest in COMEX copper futures rose 430 lots to 80,810 contracts.
Whereas some traders cited room for more selling, with downside targets pointing to $3.05 a lb or lower on July futures following Thursday's breakdown, others said cautiously they thought the worst was over. Many saw the recent rout as technical with participants preparing for more selling over the holiday.
But others viewed Friday's rally as a sign that copper may have found a bottom, at least for the medium term. "I think today was saw some technically inspired buying. I think a lot of people went home yesterday thinking we would see a pretty sizeable follow-through drop," said Vaught.