Base metals were mostly higher on the London Metal Exchange (LME) on Monday, supported by late short covering after drifting lower in early trade on a firmer dollar, traders said. But with recording-breaking oil prices casting a cloud over the economic growth outlook, the metals market remained vulnerable to a possible fund sell-off after copper set a record high of $3,308 a tonne last Thursday.
Three-month copper settled at $3,245, up $13 from Friday's London close, with the premium of cash over three months easing to $140.5/150.5 from over $160 early last week.
"I thought we might come a bit lower this afternoon because we had moved below $3,220 briefly," Standard Bank analyst Robin Bhar said.
"I thought we're going to see funds coming out to sell but surprisingly they haven't. The market managed to scramble back above the $3,220 level again."
Monday's copper close was constructive but he said there was very little volume.
Calyon Financial analyst Maqsood Ahmed put resistance for copper at $3,270 and then $3,308, with support at $3,225, $3,175 and then $2,950.
Analyst William Adams of BaseMetals.com said: "The fundamentals for the metals remain tight and therefore the overall outlook longer term remains bullish especially in those metals where stocks are low and still falling.
"However, as the dollar may still have some upside potential, boosted by a rising interest rate environment, it would not be surprising to see dollar metals prices adjust further to the downside, especially as economic growth may start to slow more than expected and metal supply is on the increase.
"All this may well justify a deeper period of consolidation.
"If some of the funds decide not to ride out such a consolidation, then their liquidation selling could hit prices hard. No doubt a sell-off would attract consumer restocking so a sell-off may be short-lived."
The euro was at $1.2839, the lowest since February 10, against $1.2907 in late New York trade on Friday.
Aluminium followed copper higher. Aluminium was at $1,936, up $8 after a two percent fall on Friday.
Tin was up $75 to $8,100, and nickel rose $175 to $15,750 after Friday's $325 fall.
But lead and zinc bucked the trend, with lead $14 down at $941 and zinc easing $1 to $1,346.
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