(REUTERS) -- Copper fell on Monday, pulling back from a four-month high as demand prospects dimmed amid a lack of progress in talks to avoid a disorderly Greek default, tempting investors to cash in on January's rally.
Benchmark three-month copper on the London Metal Exchange traded at $8,409 a tonne in official midday rings from $8,530 at the close on Friday, when it reached $8,679.50, the highest since Sept. 16.
Prices are still headed for the biggest monthly gain since October, with an increase of 10 percent.
European Union leaders will sign off on a permanent rescue fund for the euro zone at a summit on Monday, though agreement to restructure private holdings of Greek debt is unlikely to be reached in time for the talks.
A deal is required before Greece can draw on a second bailout package which it needs to meet a 14.5 billion euro repayment on its debt due in mid-March. Otherwise Athens faces a messy default.
People are wondering whether there's much upside from here given there's still slowing growth in China and the prospect of weak growth in Europe. It's difficult to see how this rally can continue, said Jesper Dannesboe, senior commodity strategist at Societe Generale.
In the wider markets, global stocks, seen as a proxy for growth prospects, were lower while the euro came off six-week highs against the dollar, making dollar-priced metal costly for European investors.
Data from the eurozone showed confidence in the economy strengthened in January for the first time since early 2011, but a recovery in Germany masked a deterioration in France and Italy in a sign of the bloc's diverging fortunes.
In supply-side news, LME copper stocks continued to decline, dropping 2,300 tonnes to 333,125 - their lowest since September 2009, though stocks in Shanghai rose ahead of China's new year break last week.
As China returns to the market, the sustainability of the new loftier price levels will become visible. In this context, domestic metal stockpiles, which have risen recently, will be an important indicator to watch in the weeks ahead, said Credit Suisse in a note.
Copper slipped in moderate volume on Friday as U.S. economic growth figures disappointed investors.
The U.S. economy, the world's largest, grew at its fastest pace in 1-1/2 years in the fourth quarter, but a strong rebuilding of stocks by businesses and weak spending on capital goods hinted at slower growth in early 2012.
Money managers, including hedge funds and other large speculators, raised their net long position in gold, silver and copper futures and options in the week ended Jan. 24, U.S. Commodity Futures Trading Commission figures showed.
In other metals traded, soldering metal tin traded at $24,000 a tonne in rings from $24,400, though LME stocks fell 50 tonnes to 9,315, their lowest point since March 2009.
Zinc, used in galvanizing, was last bid at $2,115 a tonne from $2,150, while sister metal lead, used to make batteries, traded at $2,265 a tonne from $2,295.
Aluminium traded at $2,243.50 a tonne from $2,265, while stainless-steel ingredient nickel traded at $21,410 a tonne from $21,700.
Russia's Norilsk Nickel, the world's largest producer of nickel and palladium, said it may see a modest recovery in nickel output this year, while palladium, platinum and copper could continue to decline.