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Copper Rally Fades

Gold futures slump.

Updated from 12:07 p.m. EDT

Copper prices popped up in early trading Friday as London Metal Exchange stockpiles shrank again and sales of existing homes unexpectedly rose.

But the rally was short-lived and contracts for May delivery of the metal closed unchanged at $3.07 a pound in New York. The

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exchange-traded fund, which tracks other metals as well as copper, slipped 0.6%.

The National Association of Realtors reported better-than-forecasted sales of previously owned homes in February, but Randy Diamond, an analyst at Miller Tabak in New York, notes that the inventory of unsold dwellings ballooned to near a record level.

Even so, and although the U.S. housing market has historically been a key demand segment for copper, new markets appear to be taking up any slack.

In particular, its use in manufacturing window-unit air conditioners for installation in China's soaring tower blocks is a critical factor, according to Don Coxe, global portfolio strategist at BMO Financial Group in Chicago. Because of copper's superior heat-conducting properties, it remains the metal of choice for cooling equipment even at elevated prices, he says.

Elsewhere, the Manhattan-based Economic Cycle Research Institute says its weekly leading index grew 3.9% last week, auguring well for a fair economic climate in the months ahead. But it also stands in sharp contrast to the Conference Board's index of leading economic indicators, which registered a drop of 0.5% in February, when it was published Thursday.

Among the miners, shares of

Southern Copper


slipped 1%, after


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reported that the company forecast an average price of $3 a pound for copper this year.

Rio Tinto


was rose 0.9%.

In ferrous metals, steel prices are soft in China according to a new report by Shanghai-based GroWell Research & Consulting, although the firm predicts the market will improve shortly.

Turning to precious metals, gold prices fell $6.90 to close at $657.30 an ounce on the Comex. The bullion ETFs,

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, were down about 0.9%.

Surprisingly, the capture by Iran of 15 British Royal Marine commandos in the Persian Gulf failed to give the bullion price any lift. Some investors purchase gold in times of geopolitical turmoil.

"Perhaps the incident will be resolved without any further escalation by using diplomacy," says Jon Nadler an analyst at Montreal-based bullion dealer Kitco. "But oil is telling a different story."

Crude prices were up 59 cents to $62.28 a barrel. A conflict involving Iran, OPEC's second-largest oil exporter, could interrupt global energy supplies.

Underlying the price action on Comex, open interest in the June bullion contract reached 10 million ounces while that of the April contract totaled 13.7 million, as traders rolled forward positions to the later-dated instrument. June will soon take over as the benchmark as open interest grows.