December 8, 2010 / 7:30 AM / 9 years ago

METALS-Copper shrinks from record highs on technical selling

 * Metals weaken; copper eases from record; open interest 
eyed
 * Technicals point to weaker copper prices 
 * Coming Up: German industrial output Oct; 1100 GMT

 (Updates prices)	
 By Nicholas Trevethan	
 SINGAPORE, Dec 8 (Reuters) - Metal prices fell on 
Wednesday in a technical correction after copper hit a record 
high in the previous session, easing under pressure from a 
stronger dollar and sentiment that prices had run ahead of 
themselves.	
  U.S. government bond yields rose, lifting the dollar and 
weighing on commodities after President Obama proposed a deal 
on tax cuts and unemployment payments that could boost 
economic growth in the short term but raise debt levels longer 
term. 
 Three-month copper on the London Metal Exchange 
fell 1.8 percent to $8,724.75 a tonne by 0706 GMT, after ending 
 1.1  percent higher on Tuesday, just off the record high at 
$9,044 struck earlier in the day.	
 "The move above $8,565 was a sign we had broken the 
downtrend and we are well above there. There was appetite 
(Tuesday) to push the market higher, but the move was probably 
overdone," a trader in Hong Kong said.	
 "On the upside we could check out the high above $9,000 
but it would take a lot to push it through. A lot of the 
market is starting to square up for the year end I don't think 
there is enough out there to go higher. I am looking for a 
move back towards $8,500."	
 Reuters technical analyst Wang Tao, said copper may target 
$8,704 and then $8,600 on the downside based on a Fibonacci 
retracement analysis with any rebound likely limited to $8,800.	
 But weakness may be seen as a buying opportunity by 
Chinese investors holding short positions, which analysts say 
fall due by mid-month.	
 "There will be a lot of activity around the date. There is 
lots of open interest," the Hong Kong trader said.	
 LME open interest data shows more than 41,200 lots of 
copper, equivalent to more than 1 million tonnes of metal 
become prompt on Dec. 15. < 
 In other metals zinc fell 4.2 percent to $2,209 
reversing the previous session's 3.8 percent gain.	
 "Zinc is pretty much following copper. All the markets had 
a run. In the case of zinc, there was quite a lot of arbitrage 
buying around these numbers, but it pushed on a bit too far 
and it's come back," the Hong Kong trader said.	
	
 BONDED WAREHOUSES	
 In Shanghai, the benchmark third month copper contract 
>SCFc3> lost 1.7 percent to 65,3560 yuan a tonne.	
 Investors were assessing the implications of a change in 
rules that will allow the delivery of material from bonded 
warehouses against commodities traded on Shanghai's Future 
Exchange. [ID:nL3E6N70R6]	
 "This is a very interesting development. We are looking 
for more details on exactly how it will work," a trader in 
Shanghai said.	
 "But it should let us respond to changes in the 
relationship between London and Shanghai more easily. It 
should certainly free up the logistical lag."	
 The ability to deliver bonded stocks would increase 
flexibility for traders, as they could keep the material in 
Shanghai, but ship it out easily if domestic prices fall below 
international prices.	
  	
  Base metals prices at 0706 GMT                                            
  Metal         Last       Change   Pct Move  End 2009 YTD pct chg          
  LME Cu        8724.75   -155.25     -1.75    7375.00     18.30            
  SHFE Cu*     65350.00  -1130.00     -1.70   59900.00      9.10            
  LME Alum      2254.00    -51.00     -2.21    2230.00      1.08            
  SHFE Alum*   16200.00   -130.00     -0.80   17160.00     -5.59            
  COMEX Cu**     398.15     -6.25     -1.55     332.75     19.65            
  LME Zinc      2209.00    -96.00     -4.16    2560.00    -13.71            
  SHFE Zinc    17925.00   -410.00     -2.24   21195.00    -15.43            
  LME Nickel   23465.00   -630.00     -2.61   18525.00     26.67            
  LME Lead      2329.00    -69.00     -2.88    2432.00     -4.24            
  LME Tin      24875.00   -225.00     -0.90   16950.00     46.76            
  LME/Shanghai arb^          2640                                           
  Dollar/yuan          6.6605 \ 6.6610                                      
  ** 1st contract month for COMEX copper                                    
* 3rd contact month for SHFE aluminium, copper and zinc                  
^ LME 3-m copper in yuan, including 17 pct VAT, minus SHFE  third month  
	
 (Reporting by Nick Trevethan; Editing by Ed Lane)
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