Reuters reported that London copper slipped but still retained most of the previous session's steep climb to 4-1/2 month top as a new round of US monetary stimulus measures and a weak dollar continued to support prices.
Commodities swept higher on Friday after the US Federal Reserve announced fresh stimulus steps known as quantitative easing or QE3 joining the European Central Bank to pump a stuttering economy with cash.
While commodities rallied, analysts have been cautious on prospects for prolonged growth in industrial metals prices given slowing activity in top metals consumer China and because the measures will take time to feed through to the real economy.
Mr Judy Zhu Shanghai based analyst of Standard Chartered said that "The uptrend is going to last for another few weeks at east because investors are getting really excited about this QE. Copper prices can rally to USD 9,000 at least but I still don't see real demand improving here. We won't see an improvement from Chinese industry until October to November."
Three month copper on the London Metal Exchange had ticked down 0.78% to USD 8,314.50 per tonne by 0701 GMT after touching a high of USD 8,386.25 earlier near the 4-1/2 month top of USD 8,411 hit in the previous session.
LME copper rose 3.8% on Friday its largest daily percentage gain since June 29 and is now up nearly 10% on the year. Copper prices were also supported by the dollar, which hovered near 7 low versus a basket of currencies on Monday. A soft dollar makes commodities priced in the greenback cheaper for holders of other currencies.
The most active January copper contract on the Shanghai Futures Exchange edged down 0.9% to close at CNY 59,820 per tonne. Hedge funds and other big speculators pumped more than USD 6 billion into US commodity markets last week, the most in three weeks, just before the Federal Reserve announced a third round of stimulus for the US.
The Federal Reserve will buy a total of USD 600 billion of bonds under its new stimulus program announced and will look for a US unemployment rate of 7% before it halts the program.
Capping some of the metals' gains were worries about China's property market, a top user of metals for construction but also for collateral as developers use imports to get cheaper credit.
Chinese property shares extended losses slipping more than 3% at one point after the eastern city of Nanjing was reported over the weekend to have reintroduced housing price controls to curb soaring prices. Meanwhile, traders expect activity in China to be interrupted by a week long holiday at the beginning of October. In the week ahead, factory activity will come back to the fore with a series of industrial sector reports due for release.
Credit Suisse said that this week, focus will shift toward economic numbers with euro zone PMIs due on Thursday. This could dampen the positive sentiment slightly.
Cash copper on Friday ended at its largest discount against the three-month contract since February, reflecting consumer demand that has been turned off by copper's searing rise in prices.
Source - Reuters
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