Copper prices jumped 1.5 percent to a record high on Friday as more fund money flowed into the fast-rising market, including funds from Chinese investors covering suspected short positions in the industrial metal.
Copper for delivery in three months on the London Metal Exchange (LME) traded at $4,425 a tonne, up from its close of $4,368 the previous day. It has risen 13 percent in the past month.
By 1045 GMT, prices had drifted down to just below $4,400 as rising prices encouraged profit-taking, dealers said.
"It's all been a fresh weight of money from the funds in an extraordinary bout of investment recently," a dealer said.
"In commodities investment it's been a metals phenomenon in in particular, with precious metals also stronger, and all we can expect or predict is that the market will be very choppy."
A dealer in Tokyo said: "It's a money game. The market is ignoring the fundamentals."
Spot gold prices jumped to $506.50 an ounce on Friday, their highest since February 1983.
Dealers and analysts says a world shortage of copper, employed in a variety of uses from plumbing equipment to power lines, is easing but funds still want to invest in metals.
The world copper deficit fell to 114,000 tonnes between January and August this year from 765,000 tonnes in the same period last year, International Copper Study Group (ICSG) data showed this week.
Still, ICSG numbers also showed the growth rate in world output slowed in January-August, while world number one producer Chile recorded a 6 percent year-on-year drop in October output.
"The bullish market will end this year, but maybe it will push on to $4,500 or $4,600 first. I don't want to take a big position at this moment," the Tokyo-based dealer said.
China's State Reserves Bureau (SRB) said on Thursday it would hold a fourth 20,000-tonne copper auction on Dec. 7 as part of an attempt to dampen prices that so far has been unsuccessful.
The SRB sold a total of 47,399 tonnes of spot copper at an average price of $4,680 a tonne after its last three public auctions, against 60,000 on offer.[nHKG267649]
The SRB is the focus of industry talk that a trader working on its behalf might have run up a large short position overseas.
Asian dealers said supply was tight and forecast more gains as Chinese dealers sought to cover short positions.
Shanghai copper futures closed at contract lifetime highs on Friday as the domestic market took its cue from London.
"Consumers are standing back, reluctant to pay such high prices while the situation unravels," Numis Securities analyst John Meyer said in a report.
"Some manufacturers are holding back production of copper cables and pipes over the Christmas period and are focussing on other areas due to high prices, causing demand to fall in the short term, although end-user demand looks likely to remain strong on industrial production growth in China, Japan and the United States."
Commodities have this year been favoured by investment funds keen to diversify their portfolios on inflation worries, international security fears and expectated strong growth growth in China, the world's top copper consumer.
Aluminium was trading at $2,175/$2,180 a tonne, from a close of $2,197 on Thursday, a day when it hit a 16-1/2-year high of $2,208.
Dealers said recent news from the Aluminium Corp. of China (2600.HK: Quote, Profile, Research) had weighed on prices.
On Thursday the firm said it had made positive progress in talks to buy stakes in Chinese smelters, many of which have struggled with losses this year against high raw materials and energy prices.
Zinc prices have not been as high since March 1989. On Friday the anti-corrosive metal traded at $1,765/$1,770 a tonne, flat from its close of $1,765.
Lead was at $1,067/$1,072 a tonne, holding around a record high for the market as a dollar-traded contract.
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