Metals mixed, strong dollar and liquidation weigh on prices

Base metals closed down an average of 0.8 percent yesterday, October 20 led by a 1.8 percent decline in three-month nickel prices to $10,125 per tonne, zinc prices were down 1.3 percent, copper closed off 0.4 percent at $4,652 per tonne, while lead was the only metal to buck the trend with prices climbing 0.7 percent to $2,021 per tonne. There was reported heavy CTA-fund liquidation around. Precious metals were down across the board with a 0.7 percent average decline, spot gold prices closed off 0.3 percent at $1,266 per oz.

This morning the base metals are consolidating, aluminium and tin prices are up 0.4 percent, nickel prices are off 0.3 percent and zinc prices are up 0.3 percent, lead prices are little changed and copper prices are up 0.1 percent at $4,657 per tonne. Volume has been stronger than of late, with 5,703 lots traded as of 06:44 BST. Spot precious metals are down across the board by an average of 0.7 percent, led by a 1.1 percent drop in palladium prices to $622.80 per oz, while gold prices are off 0.2 percent at $1,263.25 per oz. Weakness in the precious metals seems to be on the back of the stronger dollar.

In Shanghai, the base metals are mixed, December copper prices are off 0.3 percent at Rmb 37,140 per tonne, nickel prices are off 1.1 percent, the rest are positive with zinc prices up 0.2 percent, aluminium prices up 0.5 percent, tin prices are up 1.6 percent and lead up the most with a 1.7 percent rise. Spot copper prices in Changjiang, are off 0.3 percent, the spread between the spot and December contracts is at an equivalent of $38 per tonne back, but the LME/Shanghai copper arbitrage ratio is strong at 7.98, which means the arb window should be open to some.

In other metals in China, January iron ore prices on the Dalian Commodity Exchange are off 0.7 percent, steel rebar on SHFE are down 1.1 percent, gold prices are off 0.4 percent and silver prices are off 1.3 percent. In international markets, Brent crude oil prices are off 0.2 percent at $51.28 per barrel.

Equities were mixed yesterday with the Euro Stoxx 50 up 0.7 percent, but the Dow closed off 0.2 percent, this morning Asia is weaker with the Nikkei down 0.3 percent, the Hang Seng has not opened due to a hurricane, the CSI 300 is off 0.1 percent, the Kospi is off 0.5 percent and the ASX 200 is off 0.2 percent.

In FX, the dollar index is climbing again, recently quoted at 98.42, the highest it has been since March, the euro is on the slide at 1.0908, while the aussie, sterling and yen are fairly flat at 0.7640, 1.2244 and 103.85 respectively. More worrying perhaps is the continuing weakness in the yuan that has fallen below the January 2016 spike low at 6.7566, it was recently quoted at 6.7581, it is down 4.8 percent since the March high. Most of the other emerging market currencies we follow are not too perturbed with most within recent ranges.

The economic agenda is light today, UK public sector borrowing requirement data is out and there is data on EU consumer confidence. It is also day-two of an EU economic summit. Germany’s Bundesbank President Jens Weidmann and FOMC member Daniel Tarullo are speaking – see table below for more details.

Given reports of heavy fund liquidation in recent days it is not surprising that metals prices are under pressure, the ones bearing the brunt of the action seem to be copper, aluminium and nickel, the others are for the most part holding up well, or even climbing in the case of lead. Copper prices are now back on trend line support, so we wait to see if bottom of range buying emerges and is strong enough to absorb any more liquidation that may still be on the cards. Overall, we feel this year’s up trends are strong so we do see any weakness as corrections within the uptrends.

Gold prices started to rebound on Tuesday, October 18 but the upward moves ran out of steam yesterday with the strong dollar no doubt an issue. Silver has followed gold’s lead, while the PGMs have continued to lose altitude ahead of Saturday’s expected vote on new labour contracts in South Africa’s platinum industry. PGM prices have pulled back a long way, so we would not be surprised if this is a ‘sell-the-rumour, buy-the-fact’ situation. 

 

Overnight Performance
BST	06:44	+/-	+/- %	Lots
Cu	4657	5	0.1%	1390
Al	1623	6	0.4%	2245
Ni	10090	-35	-0.3%	691
Zn	2290.5	6	0.3%	1188
Pb	2021.5	0.5	0.0%	182
Sn	19925	85	0.4%	7
	Average		0.1%	5,703
Gold	1263.25	-2.75	-0.2%
Silver	17.44	-0.09	-0.5%
Platinum	924.2	-7.8	-0.8%
Palladium	622.8	-7.2	-1.1%
	Average PM		-0.7%

 

SHFE Prices 06:42 BST	RMB	Change	% Change
Cu	37140	-100	-0.3%
AL	12670	60	0.5%
Zn	18260	40	0.2%
Pb	15735	265	1.7%
Ni	79800	-920	-1.1%
Sn	131500	2110	1.6%
Average change (base metals)	0		0.4%
Rebar	2446	-26	-1.1%
Au	275.85	-1.2	-0.4%
Ag	3992	-53	-1.3%

 

Economic Agenda
BST	Country	Data	Actual	Expected	Previous
1:54am	Japan	BOJ Gov Kuroda Speaks
9:30am	UK	Public Sector Net Borrowing		8.2B	10.1B
10:00am	Germany	Buba President Weidmann Speaks
Day 2	EUR	EU Economic Summit
3:00pm	EUR	Consumer Confidence		-8	-8
3:15pm	US	FOMC Member Tarullo Speaks

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