Dip in gold price runs into buying, base metals prices consolidate

Copper and zinc prices closed up over 1% yesterday November, 24  with three-month copper prices closing at $5,893 per tonne, while aluminium and nickel prices closed down by an average of 0.8% and lead and tin were little changed.  Platinum prices fell 1.5%, spot gold prices were down 0.3% at $1,185.90 per oz, while palladium and silver prices were little changed.

This morning the base metals are consolidating, three-month lead prices are up 0.8%, zinc prices are up 0.6% and copper prices are up 0.3% at $5,882 per tonne, aluminium and nickel prices are little changed, while tin prices are down 0.9% at $21,100 per tonne. Volume as of 06:44 GMT has been 10,059 lots.

Precious metals are weaker across the board with spot prices down an average of 0.5%. Spot gold prices have been as low at $1,171.33 per oz, but were recently quoted at $1,180.10 per oz.

In Shanghai, January zinc prices are up 3.1%, followed by lead prices that are up 2.6% and copper prices are up 1.7% at Rmb 48,100 per tonnes, nickel is little changed, while tin prices are off 1.7% and aluminium prices are down 1.4%. Spot copper prices in Changjiang are down 0.7% at Rmb 47,920-48,120 per tonne, the spread between spot and the January date is all but flat, while the LME/Shanghai copper arbitrage window remains open with the ratio at 1:8.19.

In other metals in China, January iron ore prices are up 4.5% on the Dalian Commodity Exchange, on SHFE, steel rebar is up 6.1%, gold prices are down 1.5% and silver is off 0.1%. In international markets, spot Brent crude prices are down 0.8% at $48.47 per barrel.

Equities – the Euro Stoxx 50 and Dow both closed up 0.3 percent yesterday and this morning Asian equities are firmer with the Nikkei up 0.3, the Hang Seng is up 0.6%, the CSI 300 is up 0.9%, the ASX 200 is up 0.4% and the Kospi is up 0.2%.

In FX, the dollar index’s rally has halted up in high ground, with the index recently quoted at 101.46, having been as high as 102.05. Any correction in the dollar could lead to broad based consolidation as traders adjust to the roller-coaster moves that have been seen since the US election. The euro seems to be attempting to rebound, it was recently quoted at 1.0598, as are the yen at 113.02 and the aussie at 0.7460, while sterling is flat at 1.2465. Emerging market (EM) currencies, having been weak in recent weeks, are showing some signs of attempting to rebound, this ties in with early signs of consolidating in the dollar.

On the economic agenda, Japan’s CPI data showed falling prices, although the Bank of Japan’s reading of core CPI show prices rising 0.3% and the service PPI climbed 0.5% from a prior reading of 0.2%. Later there is UK data on GDP, business investment, index of services and CBI realised sales, Italian retail sales with US data including goods trade balance, wholesale inventories and flash services PMI – see table below for more details.

The rebounds in base metals prices after last week’s corrections have been impressive, but the higher prices do seem to have run into supply, at least for most of the metals, the exception is zinc that has set a fresh high this morning at $2,767 per tonne, basis three-months. Generally although we are bullish for most of the metals’ fundamentals it does seem as though the rallies over the past month have run prices ahead of the fundamentals, so we would not be surprised to see consolidation set in as the market absorbs scale up selling.

The strong dollar, prospects for US interest rate rises and brighter opportunities in other asset classes, have led to long liquidation in gold, silver and platinum. Palladium has bucked the trend, as it has followed equities more. Given there is still a lot of uncertainty out there in the political arena, we would have thought the pullback in gold prices would start to attract bargain hunting, especially if the rallies in other markets start to show signs of tiring.

 

Overnight Performance
GMT	06:44	+/-	+/- %	Lots
Cu	5882	19	0.3%	4256
Al	1760	-1	-0.1%	1757
Ni	11565	5	0.0%	1351
Zn	2757.5	17	0.6%	2165
Pb	2255	17	0.8%	482
Sn	21100	-200	-0.9%	48
	Average		0.1%	10,059
Gold	1180.1	-5.8	-0.5%
Silver	16.34	-0.015	-0.1%
Platinum	905.5	-9.5	-1.0%
Palladium	727.6	-3.4	-0.5%
	Average PM		-0.5%

 

SHFE Prices 06:44 GMT	RMB	Change	% Change
Cu	48100	790	1.7%
AL	13935	-200	-1.4%
Zn	22935	680	3.1%
Pb	20115	505	2.6%
Ni	94910	220	0.2%
Sn	145660	-2510	-1.7%
Average change (base metals)	0		0.7%
Rebar	3128	180	6.1%
Au	269.75	-4.05	-1.5%
Ag	4117	-4	-0.1%

 

Economic Agenda
GMT	Country	Data	Actual	Expected	Previous
11:30pm	Japan	Tokyo Core CPI y/y	-0.4%	-0.4%	-0.4%
11:30pm	Japan	National Core CPI y/y	-0.4%	-0.4%	-0.5%
11:50pm	Japan	SPPI y/y	0.5%	0.3%	0.2%
5:00am	Japan	BOJ Core CPI y/y	0.3%	0.3%	0.2%
9:30am	UK	Second Estimate GDP q/q		0.5%	0.5%
9:30am	UK	Prelim Business Investment q/q		-0.2%	1.0%
9:30am	UK	Index of Services 3m/3m		0.8%	0.8%
10:00am	italy	Italian Retail Sales m/m		0.0%	-0.1%
11:00am	UK	CBI Realized Sales		12	21
1:30pm	US	Goods Trade Balance		-58B	-56.5B
1:30pm	US	Prelim Wholesale Inventories m/m		0.3%	0.2%
2:45pm	US	Flash Services PMI		54.9	54.8

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