Fund buying has helped copper to rise further, and strong economic indicators show the price rise will continue.
Copper prices soared to their highest levels in more than three weeks, as improved economic sentiment in the United States and expectations of robust Chinese demand bolstered the funds' appetite for the industrial metal.
Copper for March delivery on the New York Mercantile Exchange's Comexdivision shot up 7.15 cents, or 2.2 per cent, to settle at $3.3570 per lb, its highest level on a closing basis since January 25.
On the London Metal Exchange (LME), benchmark copper for three-month delivery peaked at $7,450 a tonne, another high dating back to late January, before ending at $7,435 a tonne from a last bid at $7,260 on Thursday.
Since collapsing to three-and-a-helf-month lows on February 5, prices of the metal used in power and construction have staged a spectacular recovery, catching many industry players off-guard with gains of over 19 per cent.
"I'm very surprised with its strength over the last two weeks," said Justin Lennon, analyst at Mitsui Bussan Commodities (USA) Inc.
"The macroeconomic indicators have been strong lately, and copper has benefited from that, and expectations that China will be strong coming out of holiday," he said, pointing to strong regional US manufacturing data this week.
Chinese market participants return next week from their week-long Lunar New Year holidays.
Data on Friday showed US consumer prices rose less than expected in January, while prices excluding food and energy fell for the first time since 1982, soothing worries over rising inflation.
The dollar – which hit a nine-month high versus the euro – pared some of its gains after the inflation report, making dollar priced metals slightly cheaper for non-US investors.
"The inflation data eased fears of monetary tightening but that's also negative for the dollar, so the moves in metals have been largely currency informed," said Daniel Major, analyst at RBS Global Banking and Markets.
The US Federal Reserve said late on Thursday it was raising the interest rate it charges banks for emergency loans. Markets initially took the decision as a signal that the US central bank was coming closer to tightening its benchmark rate, despite assurances from the Fed to the contrary.
Also boosting copper, US stock markets, seen by some as a proxy for economic growth, advanced as investors saw the Fed's surprise increase in the discount rate as a sign of strength in the economy.
But highlighting still weak demand outside China – the world's largest metals consumer – latest LME data showed copper stocks fell 300 tonnes only to remain near six-year highs at 554,775 tonnes.
Aluminium ended at $2,139 a tonne versus $2,114. LME inventories for the metal, used in transport and packaging, eased 7,025 tonnes but remained near record levels at about 4.6 million tonnes.
Also underpinning aluminum is a recent rise in canceled warrants – material earmarked for delivery from LME warehouses – which markets see as signaling an increase in demand.
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