Metals consolidate into year-end

The base metals are consolidating this morning with average gains of 0.3% and volume of 4,908 lots, as of 06:32 GMT. Nickel and tin prices are off 0.2% and 0.6% respectively, while the rest are rebounding after recent weakness, led by a 1.1% rise in zinc prices, while aluminium prices are up 0.8% and copper prices are up 0.5% at $5,525 per tonne. Precious metals are slightly firmer with gains averaging 0.2%, with gold prices at $1,161.20 per oz.

Base metals were for the most part weaker yesterday, December 29, with prices down an average of 0.8%, led by a 2.2% fall in zinc prices, with lead prices off 1.5% and aluminium prices down 1.2% – copper prices were off 0.4% at $5,495 per tonne.  Conversely, precious metals are firmer yesterday with prices up an average of 1% with gold prices up 1.6% at $1,160.30 per tonne.

In Shanghai, the metals are mixed this morning December 30, the main gainer is aluminium with prices up 1.3%, copper prices are little changed at Rmb 45,560 per tonne and lead prices are off 0.8%, while the rest are down between 0.3% and 0.5%. Spot copper in Changjiang is off 0.1% at Rmb 44,940-45,140 per tonne, the spread is at an equivalent of $60 per tonne contango, while the LME/Shanghai copper arb ratio is at 8.25.

In other metals in China, May iron ore prices are down 2.9%, steel rebar prices are off 1.8%, while gold and silver prices are both up 1.2%.

Equities were mixed yesterday, December 29, with the Euro Stoxx 50 closing up 0.4%, while the Dow closed down 0.1% – the 20,000 level on the Dow remains elusive, the high this year being 19,987.63. In Asia this morning, the Nikkei is off 0.2%, the Hang Seng is up 1%, the CSI 300 is up 0.1%, the ASX 200 is down 0.6% and the Kospi is up 0.1%.

In FX, the dollar index is consolidating yesterday’s losses with the index recently quoted at 102.38, the euro at 1.0530 is consolidating yesterday’s gains, sterling is at 1.2278, the yen is rebounding at 116.77, as is the aussie at 0.7230. The yuan seems to be building a base, it was recently quoted at 6.9316 and most emerging market currencies we follow are consolidating, most with a slightly firmer bias.

Economic data out today includes Spanish flash CPI, UK housing equity withdrawals and US Chicago PMI – see table below for more details.

The corrections in the base metals that have unfolded in December have continued in recent days to varying degrees, with lead prices retreating the most while copper prices have managed to trade sideways. For now, we see the corrections as profit-taking ahead of year-end, key now will be whether buying returns early next year to see the overall up trends resume, or whether the consolidation continues, in which case the market may start to worry that any buying may be put off until after the Chinese Lunar New Year. If that happens then further long liquidation could unfold. With prices under pressure in recent weeks, the buying we are seeing this morning, may well be some short-covering by those that have ridden the short-term down wave.

Precious metals have seen some short-covering/buying into year-end, gold, silver and palladium prices have led the way, while platinum prices have at best turned flat. Given the extent of the sell-off in gold prices in the second half of 2016, the metal has considerable downward momentum, so the recent buying may well be short-covering ahead of year-end. With equities buoyant the opportunity cost of holding gold remains high – we wait to see if the approach of president-elect Donald Trump taking the helm leads to a pick-up in safe-haven buying. 

 

Overnight Performance
GMT	06:32	+/-	+/- %	Lots
Cu	5525	29.5	0.5%	1435
Al	1697.5	13.5	0.8%	1208
Ni	10125	-25	-0.2%	854
Zn	2550	26.5	1.1%	1142
Pb	1992.5	2	0.1%	189
Sn	20825	-125	-0.6%	80
	Average		0.3%	4,908
Gold	1161.2	0.9	0.1%
Silver	16.2	0	0.0%
Platinum	905	2	0.2%
Palladium	672.3	2.3	0.3%
	Average PM		0.2%

 

SHFE Prices 06:34 GMT	RMB	Change	% Change
Cu	45560	-10	0.0%
AL	12810	165	1.3%
Zn	20880	-55	-0.3%
Pb	17540	-145	-0.8%
Ni	85520	-370	-0.4%
Sn	146060	-750	-0.5%
Average change (base metals)	0		-0.1%
Rebar	2898	-53	-1.8%
Au	270.95	3.25	1.2%
Ag	4115	47	1.2%

 

Economic Agenda
GMT	Country	Data	Actual	Expected	Previous
8:00am	spain	Spanish Flash CPI y/y		0.9%	0.7%
9:30am	UK	Housing Equity Withdrawal q/q		-11.1B	-12.6B
2:45pm	US	Chicago PMI		56.5	57.6

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