LONDON: Copper prices spiked to the highest in more than seven years on Monday as many wary investors bet that a sizzling rally needed a pause in coming days as the year-end approached. Three-month copper on the London Metal Exchange had gained 0.9% to $7,566 a tonne by 1700 GMT after touching $7,708.50, the strongest since March 2013.
Copper is up about 13% so far in November and on track for its biggest monthly gain since November 2016.
"Copper does look dangerously overbought. It's the weight of money, the enthusiasm for the green revolution," said independent consultant Robin Bhar.
"A correction could come any time soon because a lot of CTAs (commodity trading advisor funds) and hedge funds have November year-ends. Given that a lot these funds have been long, they can crystallise profits by selling, so we might see that in the next few days."
Any correction would likely be brief, with many investors buying on the dips, Bhar added. Buoyant China manufacturing data and risk-on sentiment fuelled by vaccine developments also lifted Chinese markets, pushing copper there to an eight-year high.
China's factory activity expanded at the fastest pace in more than three years in November. Copper is used widely in the manufacturing sector and China consumes about half of the metal globally.
Most of the LME metals surged to fresh highs on Monday, although many slipped into the red in afternoon trading.
"I would buy every metal, especially those relatively undervalued like lead," said a China-based analyst, adding that the market would further rally until funds trading on macroeconomic news started taking profit and reducing positions.
Greater use of electric vehicles and expansion of renewable energy capacity to cut noxious emissions will mean accelerating demand growth for copper in coming years which will sustain prices. Copper miners and smelters are still miles apart in their negotiations on concentrate treatment charges for next year.
LME aluminium climbed 2.3% to $2,044 a tonne, zinc fell 0.6% to $2,777, lead dropped 1.6% to $2,065, nickel shed 2.6% to $16,020 and tin slipped 1.6% to $18,615. Aluminium surged to its highest in over two years, nickel and lead hit one-year highs while zinc touched the strongest in 18 months.
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