Copper touched a three-month low on Friday, hit by falling equity markets and worries about weakening demand, before short-covering pushed prices into positive terrain ahead of the session's close. Lead traded at levels last seen two months ago, led down by technical selling after falling below support at $3,450 a tonne.
Copper for delivery in three months on the London Metal Exchange fell as low as $6,785 per tonne, its lowest level since August 18, before prices recovered to close at $7,040. Prices bounced ahead of the close on short-covering, traders said. Investors were buying back assets previously sold to close out short positions as many expected prices to fall further.
On Thursday, copper shed 3 percent before closing at $6,920. "We see it falling as far as $6,500 in the near future," analyst Eugen Weinberg at Commerzbank said in a report.
Three-months lead futures closed at $3,315 after touching $3,310, down 5.2 percent. In the previous session, lead was indicated at $3,490/3,500. "Another close below this level ($3,450) could prove very dangerous for the diehard bulls," analyst Edward Meir at MF Global said in a report.
He said there was room for further falls in lead prices. European shares extended losses on Friday, mirroring declines in US markets after weaker-than-expected economic data fuelled concerns about the health of US economy.
The pan-European FTSEurofirst 300 index was down 0.78 percent with London-listed miners like Anglo American down 4.10 percent, Rio Tinto 0.74 percent lower, while BHP Billiton was up 0.25 percent. Copper, used extensively in construction and wiring, had a brief boost on Wednesday when a big earthquake struck Chile, the world's top producer of the metal. Investors, afraid of a major supply disruption, raced to buy the metal.
Now, with damage to production thought to be limited, bearish sentiment, fanned by increasing risk aversion in global markets, worries over the health of the US economy and signs of weakening Chinese buying, is dominating the market. "There is plenty of material around. The US economy is slowing and there are indications that it will have a knock-on effect on demand for copper semis in China. So the market looks set to correct lower," John Kemp, economist at Sempra Metals said.
US industrial production unexpectedly fell in October, recording its biggest decline since a matching drop in January, in a troubling sign for an economy already struggling under the weight of a housing downturn. Data from the International Copper Study Group (ICSG) showed the copper market had a deficit of 258,000 tonnes between January and August this year, against a surplus of 38,000 tonnes in the same year-ago period.
Three-months tin closed at $17,400 against $17,375/17,400 on Thursday. It hit an all-time high of $17,575 earlier this week. "Technically, tin looks all right and is holding up quite well, while everything else is being battered," a trader on the floor of the LME said. Three-months zinc was down at $2,525/2,530 from $2,590, aluminium was $20 lower at $2,550 and nickel was at $31,250 versus $31,700.