Copper ended slightly higher after reaching a record Tuesday, then fell in choppy after-hour trade as the dollar also gyrated following a Federal Reserve policy statement that reaffirmed the outlook for tame inflation and low U.S. interest rate targets.
Early in the session, copper prices advanced to record levels, though the trading range had narrowed and volume thinned from recent sessions that also saw new highs in the metal.
After copper settled slightly higher in New York, the Fed said the U.S. economic recovery was still too slow to bring down unemployment. Fed policy makers reaffirmed the central bank's commitment to keep purchasing U.S. Treasuries to stimulate growth and create jobs.
The Fed also said the pace of business spending seemed to have slowed from earlier in 2010, which suggested slow but steady U.S. demand for copper, a metal used in power and construction.
U.S. dollar trading was choppy after the Fed's announcement but the euro had already pared gains and retreated from a three-week high against the U.S. currency after stronger-than-expected U.S. retail sales data lifted bond yields and investor optimism about the economy.
Increased U.S. interest rate differentials favored the dollar, giving it a boost after the Fed committee released its policy communique.
"The dollar strengthened (after the FOMC statement). The Fed kept their policy in place. They are going to be buying Treasuries, which means they are still seeing some weakness in the economy," said Edward Meir, commodity analyst at MF Global in Connecticut.
Benchmark copper on the London Metal Exchange peaked for a second day, hitting $9,267.50. The metal closed at $9,165 a tonne from a close of $9,220 Monday, its second record level in two days..
In after-hours trade, the red metal initially rose to $9,240 when the Fed issued its statement, then fell to $9,164.80 once the dollar turned higher.
COMEX copper for March delivery edged up 0.20 cent to end at $4.2090 per lb, after setting a fresh record at $4.2225 a lb. for a fourth-month contract.
In late business, New York copper rallied, then fell, as the dollar chopped around after the Fed's statement. March copper was flat at $4.2070 a lb, by 4 p.m. EST.
Analysts said they thought copper's rally may be running out of steam and needed to consolidate its recent run. They noted that prices were traveling in a smaller range and volume was thinning compared with recent sessions.
Total COMEX copper volume was light, near 26,000 lots, less than half its 30-day average by 3:20 p.m. EST.
"In general, I think copper is way, way overcooked and it's bound to have some pullback from here. but we need a trigger to bring on some selling and I don't think the Fed statement is going to do it," Meir added.
Lead and tin rode copper's coat tails to their highest in a month during the session. Nickel hit its highest in two months.
"Tighter supply next year, the ETP launches - copper fundamentally in long run is still looking good," Andrey Kryuchenkov, analyst at VTB Capital, said. "We are approaching the holiday period, so there will be some consolidation here."
INVENTORIES
LME zinc stockpiles saw a huge rise, data showed, with a second inflow of around 44,000 tonnes into New Orleans bringing stocks there up by 70,000 tonnes in two days.
At just under 700,000 tonnes, stockpiles of the metal used in galvanizing are at their highest since December 2004, underlining bulging oversupply.The global market for refined zinc stands at some 12.5 million tonnes.
Zinc prices ended at $2,301 a tonne from $2,320.
Focus remains on LME cash contracts and warrants holdings where a dominant holding rose to 90 per cent from 50-80 per cent, the latest data showed, reflecting tight nearby supply. Investment bank JPMorgan does not hold more than 90 per cent of copper stock warrants in LME warehouses, it told Reuters. In other metals, lead, used in batteries ended at $2,450, from $2,440, having hit a one-month top of $2,472.50 earlier.
Stainless steel metal nickel was at $24,500, up from $24,530. It earlier hit a two-month high at $24,975.
Aluminium ended at $2,351 from $2,330, while tin closed at $26,250 from $26,150. It earlier touched its highest in one month at $26,450 a tonne.