Copper pulled back from a near three-week high Wednesday, as investors took their cues from a strengthening U.S. dollar and weakness in equity markets after mixed U.S. home sales data suggested the beaten-down sector had yet to hit bottom.
Copper for July delivery on the New York Mercantile Exchange's Comex division shed 2 cents (U.S.) to close at $2.1210 a pound. Earlier, the contract spiked to a session peak at $2.1590, the contract's highest level since May 8.
Copper for three-month delivery on the London Metal Exchange was last bid at $4,615 a tonne, after pulling back from its session high of $4,725.
The surrendered gains were in response to data showing the inventory of unsold homes for sale in the United States climb 8.8 per cent to 3.97 million, analysts said.
"The housing numbers are a bit of a mixed bag," said Sterling Smith, vice-president with FuturesOne in Chicago. "The supply number rose and I think people were hoping that number would drop by a small amount, and that's kind of keeping the copper a little heavy here."
The dollar lengthened gains against the euro after the U.S. housing data. The single currency had already been knocked on comments from a European Central Bank policy maker suggesting further interest rate cuts could not be ruled out.
A stronger dollar makes metals traded in the U.S. currency more expensive for non-U.S. investors. Major U.S. stock market indexes fell after the existing home sales data.
Prices of copper, used in power and construction, have gained about 50 per cent this year as strong Chinese buying sparked a rise in cancelled warrants - material earmarked for delivery - on the London Metals Exchange.
However, the stock draw-downs seem to be running out of steam.
On Tuesday, cancelled warrants fell to 43,375 tonnes from 47,625 tonnes on May 22, but offering further support for copper, LME inventories fell 7,300 tonnes to 319,275 tonnes.
BHP Billiton voiced uncertainty about the sustainability of Chinese buying.
Aluminum closed at $1,405, down from $1,452. The relentless rise in LME stocks continued, jumping 9,700 tonnes to a new record above 4.21 million tonnes.
Aluminum cancelled warrants were at 50,250 tonnes on May 26 compared with 47,725 tonnes on May 22.
Used in transport and packaging, aluminum has come under pressure in recent months on downbeat data from auto makers.
Highlighting this, General Motors Corp.'s board will meet to review options for the struggling auto maker after confirming a crucial bond exchange had fallen far short of its goal to cut debt and avoid bankruptcy.
Steel making ingredient nickel was last bid at $13,200 from $13,400 but also touched a high of $13,900 - its highest level since Oct. 8. Zinc finished at $1,460 a tonne versus $1,500.
On Tuesday, cancelled nickel warrants were 6,492 tonnes from 7,614 tonnes on May 22, while LME stocks fell 954 tonnes to 108,642 tonnes.
In April, Chinese nickel imports hit a monthly record of 21,031 tonnes, while LME nickel stocks have fallen sharply since late April, when they reached above 114,400 tonnes.
Analysts said nickel was supported by a slow trickle of re-stocking by Chinese steel mills, although speculative stock building could also be a factor.
"Stainless steel producers really stepped away from the market in the last quarter of last year but they've run down inventories strongly now," said David Thurtell, an analyst with Citigroup. "There's definitely signs consumers are buying on dips."
Battery material lead closed at $1,445, flat on the day and tin was flat at $13,600.