NEW YORK/LONDON: Copper pushed higher for a third straight day on Friday, albeit at a less aggressive rate and in lighter-than-usual volumes, as the market paused to catch its breath from a blistering 14-percent rally this week.
Fed by investor optimism toward Europe's initiatives taken this week to tackle its regional debt crisis, signs of Chinese purchases, and escalating supply threats at the world's No. 2 mine, copper prices surged over $1,000 this week -- the metal's biggest weekly charge in almost 32 years.
But copper bulls were a bit hesitant to chase prices much further on the last trading day of the week, with some opting to cash in on the strength after a weak sale of Italian bonds on Friday revealed that investor confidence in the agreement remained shaky.
"All that can be said about the EU bailout is that market expectations were very low and the politicians beat those expectations," said Justin Lennon, analyst with Mitsui Bussan in New York. "The plan is a bit short on details and economically, the EU is still contracting."
London Metal Exchange (LME) three-month copper peaked at a five-week high at $8,280 per tonne, before ending the day with a $30 gain at $8,175.
In New York, the benchmark December COMEX contract rose 1.40 cents to settle at $3.7060 per lb, near the upper end of its $3.6155 to $3.75 session range.
Copper has been one of the more volatile markets since the start of the month and quarter: sinking to its lowest in more than a year at $6,635 in London and below $3 in New York on Oct. 3, before staging a more than 20-percent reversal in the weeks since.
As prices have snapped back, open interest has grown as well, signaling that new long positions have been built up during the move.
"I think copper is going too far too fast at this point," warned Bill O'Neill, partner of LOGIC Advisors in Upper Saddle River, New Jersey. "We are bullish long-term on copper but not to have a rally of this magnitude so quickly."
Volumes slowed down as the volatile trading week came to a close. A little more than 51,000 lots were traded late in New York, nearly 20 percent below the 30-day norm, according to Thomson Reuters preliminary data.
Investors are betting on a recovery in demand for industrial metals and energy, after data showed the US economy expanded at its fastest pace in a year in the third quarter.
On Friday, a survey showed US consumer sentiment improved in October for the second month in a row as consumers felt more upbeat about the economy's prospects.
"The US data which was soft in August and September has been strong the entire month of October. The market, which was trading on the possibility of a US recession, is having to price that out entirely," said an analyst at a category one LME firm.
On China, which accounts for about 40 percent of the world's copper demand, he noted: "Chinese data is still reasonably solid. I struggle to see where the softening Chinese economy is. It's not in the data." Copper prices were also underpinned by this week's declaration of force majeure on some concentrate sales from Freeport-McMoRan's strike-hit Grasberg mine in Indonesia -- the world's second-largest copper mine.
Confirming improving demand for copper, inventories at warehouses monitored by the LME fell for a sixth consecutive day, by 2,300 tonnes to 432,375 tonnes, data showed.
Copper stocks have fallen by about 8 percent this month. Material for next-day delivery has been getting harder to come by and is trading at a discount of only $2.50 to the three-month benchmark contract - its narrowest since March.
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