Metals consolidate after strong gains

The base metals put a strong performance yesterday with three-month prices closing up with average gains of 2.5 percent, led by nickel that was up 7.3 percent at $11,210 per tonne, tin was up 3.1 percent at $21,850 per tonne and copper closed up 2.2 percent at $5,100 per tonne, the others were up between 0.3 and 1.1 percent. Precious metals were mixed yesterday with spot gold prices off 1.7 percent at $1,282.20 per oz, silver prices were off one percent, while the PGMs were stronger with palladium prices up 4.5 percent to $650 per oz and platinum prices were up 0.1 percent.

This morning, the metals are consolidating, nickel prices are up 0.3 percent, tin prices are little changed, while the rest are off between 0.2 percent for copper at $5,089 per tonne and 0.6 percent for lead at $2,091 per tonne. Volume remains high, with 13,556 lots traded as of 06:39 GMT, volume in copper (4,602 lots) has been closely matched by nickel (4,555 lots).

Precious metals prices are for the most part little changed, the exception is the platinum prices that is up 0.6 percent at $1,003.80 per oz, the rest are little changed, with gold prices at $1,282.77 per oz.

In Shanghai, the base metals prices are mixed this morning, with January nickel and tin prices up 3.3 and 3.9 percent respectively, copper prices are up 1.5 percent at Rmb 40,470 per tonne, lead prices are down 0.7 percent, aluminium prices are off 0.4 percent and the zinc price is off 0.1 percent. Spot copper prices in Changjiang are up 1.3 percent at Rmb 40,480-40,680 per tonne, the spread has reverted to a backwardation, equivalent to $30 per tonne and the LME/Shanghai copper arb ratio is at 1:7.95.

In other metals in China, iron ore prices for January are up two percent on the Dalian Commodity Exchange (DCE) and on SHFE, January steel rebar prices are up 0.2 percent, gold prices are off 0.8 percent and silver prices are off 0.2 percent. In international markets, Brent crude oil prices are off 0.4 percent at $46.13 per barrel.

Equities were up yesterday with the Euro Stoxx 50 up 1.9 percent and the Dow closed up 2.1 percent, helped by the view that Hillary Clinton would win the election. In Asia this morning, the markets are generally firmer, the Nikkei is little changed, the Hang Seng, Kospi and CSI 300 are up 0.3 percent and the ASX 200 is up 0.1 percent.

In FX, the dollar index rebounded yesterday and was recently quoted at 97.71, the euro is consolidating at 1.1045, as are sterling at 1.2405, the yen at 104.38 and the aussie at 0.7700. The yuan is weak at 6.7785, while other emerging market currencies are consolidating within their recent ranges, although the rand is looking stronger.

The economic agenda is busy, not least with the US election, but in addition, UK BRC retail sales rose 1.7 percent, China’s trade surplus expanded with exports falling 7.3 percent and imports falling 1.4 percent compared with a year ago, Japan’s leading indicators came in at 100.5 percent, after a previous reading of 100.9 percent and Germany’s industrial production dropped 1.8 percent. Data out later includes France’s trade and budget balance, UK manufacturing and industrial production, with US data including a small business index and job openings- see table below for more details.

The metals seem to be trading their own agenda with prices either racing higher or consolidating having recently run higher. The fact this has happened during and just after London Metals Week suggests all the talking ended up turning sentiment more bullish and the market is adjusting accordingly. The market is at risk from a knee-jerk downward reaction should there be a Donald Trump win, but considering how far prices have moved over the past few weeks suggests prices may have run ahead of themselves. As such, we should expect some consolidation. We remain bullish overall though.

With the odds favouring a Hillary Clinton win, spot gold prices have pulled back to consolidate. We would not be surprised if prices pulled back further on a Clinton win, but if there is a Trump win, then we would expect gold prices to jump higher.  Regardless of who wins, once the dust settles after the election we would expect gold prices to remain well supported and for prices to work higher.   

 

Overnight Performance
GMT	06:39	+/-	+/- %	Lots
Cu	5089	-11.5	-0.2%	4602
Al	1721	-7.5	-0.4%	1951
Ni	11240	30	0.3%	4555
Zn	2463	-8.5	-0.3%	2128
Pb	2091	-13.5	-0.6%	222
Sn	21840	-10	0.0%	98
	Average		-0.2%	13,556
Gold	1282.77	0.57	0.0%
Silver	18.243	0.023	0.1%
Platinum	1003.8	5.8	0.6%
Palladium	650.8	0.8	0.1%
	Average PM		0.2%

 

SHFE Prices 06:38 GMT	RMB	Change	% Change
Cu	40470	590	1.5%
AL	13335	-60	-0.4%
Zn	19830	-20	-0.1%
Pb	16710	-125	-0.7%
Ni	88740	2850	3.3%
Sn	149870	5570	3.9%
Average change (base metals)	0		1.2%
Rebar	2805	6	0.2%
Au	280.8	-2.25	-0.8%
Ag	4120	-8	-0.2%

 

Economic Agenda
GMT	Country	Data	Actual	Expected	Previous
12:01am	UK	BRC Retail Sales Monitor y/y	1.7%		0.4%
2:32am	China	Trade Balance	325B	366B	278B
2:40am	China	USD-Denominated Trade Balance	49.1B	51.7B	42.0B
3:45am	Japan	10-y Bond Auction	-0.06|4.4		-0.06|3.8
5:02am	Japan	Leading Indicators	100.5%	100.5%	100.9%
7:00am	Germany	German Industrial Production m/m	-1.8%	-0.5%	2.5%
7:00am	Germany	German Trade Balance	21.3B	23.4B	22.2B
7:45am	France	French Gov Budget Balance			-96.0B
7:45am	France	French Trade Balance		-4.1B	-4.3B
9:30am	UK	Manufacturing Production m/m		0.3%	0.2%
9:30am	UK	Industrial Production m/m		0.1%	-0.4%
All Day	EU	ECOFIN Meetings
11:00am	US	NFIB Small Business Index		94.6	94.1
3:00pm	UK	NIESR GDP Estimate			0%
3:00pm	US	JOLTS Job Openings		5.67M	5.44M
5:00pm	UK	MPC Member Haldane Speaks

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