Metals gap higher but struggle to hold on to gains

The base metals ended last week in consolidating mode, albeit with an upside bias, with the base metals complex closing up an average of 0.9%, basis three-month prices, on Friday December 9. Precious metals closed Friday under pressure with prices down an average of 0.9%, with spot platinum prices off 2.8% at $910 per oz, while gold prices closed down 1% at $1,158.20 per oz.

This morning, December 12, the base metals prices are up across the board with gains averaging 0.5% as of 06:05 GMT, with prices ranged between up 0.2% for nickel and 0.9% for aluminium – copper prices are up 0.5% at $5,861 per tonne, although they were higher ealrier. Precious metals this morning are mixed, gold and platinum prices are little changed, silver prices are down 0.3% and palladium prices are up 0.3%.

In Shanghai, the base metals contracts have started week on a bullish note with prices up an average of 1.6%, led by 2.6% gains in nickel prices and 2.4% gains in aluminium prices. Lead, zinc and copper prices are up around 1.4%, with tin lagging behind with a 0.4% gain. February copper is up 1.5% at Rmb 47,810 per tonne. Spot copper in Changjiang is up 1.8% at Rmb 47,720-47,920 per tonne, the spread between spot and the February futures is at an equivalent of $15 per tonne backwardation and the LME/Shanghai copper arb ratio is at 8.16 per tonne, which should mean the arb is open for some imports.

In other metals in China, May iron ore prices are up 4.5% on the Dalian Commodity Exchange, on SHFE, May steel rebar prices are 5.1%, gold prices are down 0.5% and silver prices are up 0.2%. In international markets spot Brent crude prices are up 4.5% at $56.72 as Saudi Arabia agreed to cut more production than expected.

Equities remained bullish on Friday, December 9 with the Euro Stoxx 50 closing up 0.4% and the Dow closed up 0.7%. This morning, December 12, Asian equities are mixed with the Nikkei up 0.8%, the ASX 200 is little changed, the Kospi is up 0.1%, but the Hang Seng and CSI 300 are weaker by 1% and 2.3% respectively, dragged down by concerns over the housing market in China.

In FX, the dollar index has been rebounding in recent days, it reached a high this morning of 101.79, it was recently quoted at 101.55 so may have run into some resistance ahead of the November high at 102.05. The euro sank earlier this morning to a low of 1.0525. but it was recently quoted at 1.0560, sterling prices are drifting lower at 1.2588, the yen at 115.60, continues to weaken and the aussie is consolidating at 0.7457. The yuan continues to fall, it was recent quoted at 6.9328 and the other emerging market currencies we follow that had been recovering in recent days, have turned lower again this morning. The exception is the ringgit that seems to be benefitting from the stronger oil price.

The economic calendar is fairly light today, UK house prices fell more than expected in November, Japan’s tertiary industry activity climb 0.2% after a previous 0.3% fall and preliminary machine tool orders dropped 5.6%. Later there is UK data on leading indicators and the US Federal budget balance.

Many of the base metals’ prices gapped higher on the opening this morning and at the day’s highs prices were up an average of 1.3%, but prices have since given back some of those gains and are not looking as bright as they were earlier. For the most part, prices seem to be holding in consolidation mode and there is a danger that they start to look heavy if prices do not set fresh highs soon. The stronger dollar is no doubt acting as a headwind. That said, the underlying trends are up trends and dips have tended to be short-lived and well supported.

The precious metals continue to be weighed down by the strength in other markets and the dollar, gold prices have set a fresh pullback low at $1,154.55 per oz, the rest are holding up better, with palladium prices consolidating in high ground. With the FOMC decision on Wednesday, we wait to see how much of the rate rise, assuming there is one, is already discounted in the gold price.

 

Overnight Performance
GMT	06:05	+/-	+/- %	Lots
Cu	5861	31	0.5%	2375
Al	1759.5	16	0.9%	1138
Ni	11495	25	0.2%	1497
Zn	2716	10.5	0.4%	598
Pb	2330	19	0.8%	211
Sn	21030	75	0.4%	13
	Average		0.5%	5,832
Gold	1157.63	-0.57	0.0%
Silver	16.807	-0.048	-0.3%
Platinum	910.8	0.8	0.1%
Palladium	729.2	2.2	0.3%
	Average PM		0.0%

 

SHFE Prices 06:06 GMT	RMB	Change	% Change
Cu	47810	710	1.5%
AL	13535	315	2.4%
Zn	22820	310	1.4%
Pb	20865	295	1.4%
Ni	96810	2430	2.6%
Sn	144740	620	0.4%
Average change (base metals)	0		1.6%
Rebar	3493	168	5.1%
Au	268	-1.3	-0.5%
Ag	4244	7	0.2%

 

Economic Agenda
GMT	Country	Data	Actual	Expected	Previous
12:01am	UK	Rightmove HPI m/m	-2.1%		-1.1%
4:30am	Japan	Tertiary Industry Activity m/m	0.2%	0.3%	-0.3%
5:58am	Japan	Prelim Machine Tool Orders y/y	-5.6%		-8.9%
2:30pm	UK	CB Leading Index m/m			0.1%
7:00pm	US	Federal Budget Balance		-99.5B	-44.2B

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