* Aluminium hits 16-month high at $2,015/T
* Zinc hits near 3-year high of $2,345/T
* Investors slowly drawn back into commodities (Updates with closing prices)
By Maytaal Angel and Eric Onstad
LONDON, July 21 Zinc and aluminium prices hit their highest in more than a year on Monday as investors sought exposure to commodities with improved fundamentals, but copper's gains were curbed by worries over China's property sector and over a build-up of stocks.
The gains were probably driven by CTAs (commodity trading advisors), or managed futures funds, said analyst Andrey Kryuchenkov at VTB Capital, referring to funds that often use computer algorithms to track momentum.
Investors are slowly being drawn back into commodities, attracted by stronger global economic growth and more volatility within sub-sectors, typified by current investment flows out of grains into industrial metals.
A trader said some speculative money seemed to be moving from equities into metals as European stock markets lost more ground, weighed down by concern over the situation in Ukraine.
"Investors are looking for commodities that have a good story behind them, especially those perceived to have improving fundamentals like zinc and aluminium, but copper is an outlier," said Nic Brown, head of commodities research at Natixis.
Three month aluminium on the London Metal Exchange closed up 2 percent at $2,020 a tonne, the strongest since Feb. 28, 2013.
Zinc jumped 1.9 percent to end at $2,336 a tonne, trimming gains after touching a near three-year high of $2,345 a tonne.
Helping aluminium, LME stocks fell to 4.947 million tonnes, their lowest point since September 2012 MAL-STOCKS. Also, cash aluminium traded at a discount of just $16.50 a tonne to the three month price CMAL0-3, its narrowest since September 2012.
"Both zinc and aluminium stocks are showing downward trends, which are fundamentally supportive of the market," said Kryuchenkov.
Daily average primary aluminium output excluding China fell to 67,000 tonnes in June, from 67,500 tonnes in May, data from the International Aluminium Institute (IAI) showed on Monday.
Zinc meanwhile continued to gain from falling production rates at large mines such as Century in Australia, with little in the way of giant new projects on the horizon. Also LME stocks MZN-STOCKS are at their lowest since December 2010.
By contrast, the case to sell copper going forward is compelling, some analysts say.
Shanghai copper stocks rose 28.9 percent last week, LME stocks have risen since late June, while Comex copper stocks have climbed to eight-month peaks. CU-STX-SGH HG-STX-COMEX MCU-STOCKS
"We are negative on copper. Our current forecasts anticipate copper surpluses of 225,000 tonnes in 2014, followed by 285,000 tonnes in 2015," said Brown.
Copper lagged, rising 0.6 percent to finish at $7,025 a tonne, not far off this month's 3-week low of $6,960.
Also a concern, some of the wealthiest Chinese are paring their property investments and turning to private equity or overseas holiday homes, a sign of fading hopes that the once red-hot market can bounce back any time soon.
Elsewhere, COMEX copper speculators boosted net 'long' or buy positions to their highest since at least 2006 in the week to July 15, according to the Commodity Futures Trading Commission and Reuters data
"There is also likely to have been profit-taking (in copper) on the part of speculative financial investors after they had increased their net long positions considerably for the fourth straight week," said Commerzbank in a note.
In other metals, lead closed up 0.7 percent at $2,203 a tonne, tin ended up 0.5 percent at $22,200 while nickel finished up 0.9 percent at $18,825 a tonne.
Three month LME copper
Most active ShFE copper
Three month LME aluminium
Most active ShFE aluminium
Three month LME zinc
Most active ShFE zinc
Three month LME lead
Most active ShFE lead
Three month LME nickel
Three month LME tin (Additional reporting by Melanie Burton in Sydney; Editing by Mark Potter and David Evans)