Copper eased on Monday, after earlier hitting a two-week high, as investors proved wary of China's tighter credit conditions, despite speculation Beijing would move to stimulate its economy.
Three-month copper on the LME ended 0.3 percent lower at $6,640 a tonne, after reaching $6,686 a tonne early in the session, the highest since March 11.
Copper had bottomed at 3-1/2 year lows on March 19 after a bond default by a Chinese solar panel maker aroused fears that defaults could spread, unravelling demand for copper as collateral in financing deals.
But China's Premier Li Keqiang said last week Beijing was ready to support the cooling economy, while warmer weather has begun to boost orders from construction and manufacturing sectors, buttressing prices.
"The correction (to 3-1/2 year lows) was not really driven by fundamentals. The second quarter is seasonally strong, stocks are falling, demand has been good and China is making clear it will channel more investment into infrastructure," said Wiktor Bielski, head of commodities research at VTB Capital.
Although copper prices have bounced off the lows, they are still on track to close the month down nearly 5 percent, the biggest loss since June, despite a rise of 2.8 percent last week.
"Over the last few weeks the copper price has dropped back to test a major support level in the region of $3/lb (around $6,614 a tonne) and it is interesting to note, therefore, that it put on a fraction over 2 percent last week," said Bill McNamara, technical analyst at Charles Stanley.
"That looks like a direct consequence of that support level being successfully tested and... traders are probably going to want to see further upside this week before they are persuaded to jump back in."
Aluminium also reached a two-week high as consumers piled in on fears that more supplies could get caught in a logjam after a court ruling last week scuppered the London Metal Exchange's plan to free up metal stuck in warehouses for months on end.
Russian aluminium giant United Company Rusal Plc could fall into line with proposed London Metal Exchange rules to cut logjams in warehouses, with a fuller and fair consultation process, a company executive said.
Aluminium extended gains from Friday, when top U.S. producer Alcoa announced plans to cut 147,000 tonnes of capacity at two aluminium smelters in Brazil.
Three-month aluminium on the LME closed 1.5 percent higher at $1,785 a tonne, having earlier hit its highest since March 11 at $1,970.50 a tonne. The metal is heading for gains of over 1 percent this month.
Looking ahead, China's factory activity is expected to have picked up slightly in March, a Reuters poll showed, in a rare piece of good news, though the figure is unlikely to alter views that the world's second-largest economy faced a slow first quarter.
China's official manufacturing purchasing managers' index (PMI) may rise to 50.3 from February's 50.2, according to the poll. The official PMI figures will be released on Tuesday at 0100 GMT.
"Chinese growth concerns are pretty much priced in," analyst Tim Radford of Sydney based-advisor Rivkin said.
"Probably there will be a bit of caution until tomorrow's data release, but I could see prices continuing higher. Even if China's PMI does miss to the downside, if it's a small miss I don't see it having a huge impact on prices," he said.
China consumes around 40 percent of the world's copper.
On the downside, however, Indonesia is moving to ease a ban on copper concentrate exports, having approved big increases in 2014 copper sales for local units of copper miners Freeport McMoRan Copper & Gold Inc and Newmont Mining Corp .
Even so, speculators betting on further price falls might yet be caught out for following the herd. According to data from the Commodity Futures Trading Commission for the week to March 25, hedge funds and money managers boosted net short or sell positions to the largest since late July.
"The copper price had fallen to its lowest level since July 2010 during the period under review. There is likely to have been widespread covering of short positions meanwhile, money managers thereby contributing to the recovery of the copper price," said Commerzbank in a note.
In economic news, Federal Reserve Chair Janet Yellen gave a strong defense of the central bank's easy-money policies on Monday, saying its "extraordinary" commitment to boosting the economy, especially the still struggling labor market, will be needed for some time to come.
Zinc closed at $1,983, up 0.3 percent, tin ended at $22,800, down 0.3 percent and lead was up 0.1 percent at $2,068, while nickel closed at $15,900, up 1.3 percent from a last bid of $15,700 on Friday.
(By Maytaal Angel and Harpreet Bhal; With reporting by Melanie Burton in Sydney; Editing by Jane Baird)