NEW YORK/LONDON, July 22 (Reuters) - Copper extended gains into a fourth day on Thursday, rallying to its highest level in more than two months, as strong technical momentum and improving demand indications attracted further fund interest.
"People have been and continue to estimate strong global demand," said Bill O'Neill, partner of LOGIC Advisors in Upper Saddle River, New Jersey.
"The funds finally came back in over the last day or so, after being out, for the most part, of all of the LME metals, so we are starting to see fund activity again," he said.
Copper for September delivery HGU0 on the COMEX metals division of the New York Mercantile Exchange shot up 7.15 cents, or 2.3 percent, to end at $3.1645 per lb, its highest level on a closing basis since May 27.
The benchmark contract, which has risen 8 percent in four days, continued to be supported by technical momentum, which picked up after the Thursday breakout through the top side of its contracting triangle.
But that momentum waned as resistance held at the 200-day moving average.
On the London Metal Exchange, copper for three-months delivery CMCU3 closed up $160 at $7,010 a tonne, down a bit from a session top at $7,050, its highest since May 14.
"It's a combination of factors," said Gayle Berry, an analyst at Barclays Capital. "Inventories continue to be drawn down on the LME. If you look at what the fundamentals have been doing – they are shaping up to be quite positive."
Copper stocks at LME-registered warehouses fell another 1,100 tonnes on Thursday, bringing total levels to 416,525 tonnes, extending a trend that began in February when levels stood at 555,075 tonnes.
She added that data showing a copper deficit from the International Copper Study Group on Wednesday, followed by comments by Chinese Premier Wen Jiabao on consumption on Thursday, had also boosted overall sentiment.
An acceleration in European private sector business activity in July gave another lift for the bulls, surprising economists who had expected a slowdown.
Investors are awaiting the results of the European Union examination of banks, which are due on Friday and are expected to show generally positive results for Greece, Italy and Ireland and a few failures in Portugal and Spain.
Aluminum CMAL3 was untraded but last bid at $2,044 a tonne from $2,008 after earlier hitting $2,061.75, its highest since May 28.
"Over the next few months, the weakest commodity sectors are likely to be those in which Chinese production growth is outpacing its own domestic requirements,"
Barclays said in a note, singling out steel, aluminum and zinc in particular. Zinc CMZN3 closed up $33.50 at $1,948.50 a tonne, after earlier hitting a near two-month high at $1,957.75 a tonne.
Lead CMPB3 firmed $75 to $1,940 a tonne, after touching $1,945, its highest peak since May 17.
Tin CMSN3 was untraded at the close but last bid at $18,550 a tonne from a last quote of $18,370/$18,375 on Wednesday. It earlier hit a near three-month high at $18,600.
Nickel CMNI3 ended at $20,250 a tonne from a last quote of $19,495/$19,500, down from an earlier peak and three-week high at $20,251.