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METALS MORNING VIEW 05/12: Metal prices consolidate while broader markets show weakness

Three-month base metals prices on the London Metal Exchange were mixed in the morning of Wednesday December 5, with zinc and copper up by 0.4% and 0.3% respectively, while the rest of the complex was little changed or weaker.

This follows a volatile day in markets on Tuesday, when the base metals were mixed, but when US equity markets were hit hard by nervousness over the flattening of the yield curve, which has inverted in some places.

Volume across the complex has been above average with 5,947 lots traded as at 7:20am London time.

The precious metals were weaker on Wednesday. Gold fell by 0.3% to $1,234.50 per oz recently while palladium was 0.5% lower. Silver was off 0.7%.

In China this morning, January contract prices for base metals on the Shanghai Futures Exchange were mixed, with copper off by 1.2% at 49,330 yuan ($7,186) per tonne, nickel off by 0.8% and aluminium off by 0.5%, while the rest were up between 0.2% for tin and 0.5% for lead.

Spot copper prices in Changjiang were down by 0.9% at 49,350-49,630 yuan per tonne and the LME/Shanghai copper arbitrage ratio was firmer at 7.97, compared with 7.91 on Tuesday, this suggests Chinese copper prices have not pulled back to the same extent as LME copper prices.

In other metals in China, the May iron ore contract on the Dalian Commodity Exchange was up by 2.5% at 477.50 yuan per tonne. On the SHFE, the May steel rebar contract was up by 3.9%. The fact these basic building block metals and ore prices are strengthening bodes well and suggests yesterday’s weakness was more to do with the yield curve rather than President Donald Trump’s tweets on trade.

In wider markets, spot Brent crude oil prices were easier, off by 0.2% $61.10 per barrel – the recent low being $57.52 per barrel. The yield on US 10-year treasuries was weaker and has dropped below the 3% level to 2.9109% and the yield on the US 2-year and 5-year treasuries were at 2.7988% and 2.7870% respectively. The German 10-year bund yield has dropped to 0.2600%. The weaker yields suggest investors expect the US Federal Reserve to slow the pace of interest rate rises, but the inverted yield curve is seen as a warning that an economic slowdown may be on the way.

Asian equity markets on Tuesday have followed the US markets lower: the Nikkei (-0.53%), the CSI 300 (-0.48%), the ASX 200 (-0.78%), the Kospi (-0.62%) and the Hang Seng (-1.59%).

This follows extremely weak performances in US markets on Tuesday, where the Dow Jones closed down by 3.1% at 25,027.07, while in Europe, the Euro Stoxx 50 was down by 0.8% at 3,189.25.

The dollar index spiked lower to 96.37 on Tuesday, but closed at 96.95 and was recently quoted at 97.11 – the stronger dollar and weaker US Treasury yields do not go hand-in-hand, suggesting the dollar was up for safe-haven reasons, and yesterday’s stronger yen (113.02) would support that view. The euro is consolidating around 1.3333, while the Australian dollar (0.7297) and sterling (1.2710) are weaker.

The rebound in the yuan has halted for now with the currency recently quoted at 6.8661 – this suggests confidence in the trade developments. The other emerging market currencies we follow are for the most part on a back footing, suggesting risk-off.

In data already out on Wednesday, China’s Caixin Services purchasing managers index (PMI) rebounded to 53.8 from 50.8 previously, later there is data on Spanish, Italian, French, German, European Union and United Kingdom services PMI, EU retail sales and the US beige book. In addition, European Central Bank Mario Draghi is speaking.

Copper prices have been the hardest hit by in recent days. Having spiked up to $6,352 per tonne on Monday on the trade news that came out of the G20 meeting, the selling has returned and prices are back in mid-ground. The other metals have done better at holding on to their gains following the trade developments, which suggests they may be being more reflective of what the trade deal means. It may be that copper has been the hardest hit as Comex copper was open yesterday evening when the Dow Jones was under pressure. Given the trade truce and the tightening fundamentals, we still expect a gradual switch to a “glass half full” outlook, from the “glass half empty” one we have held since June.

Gold prices have pulled back from Tuesday’s highs but the uptrend seems intact. With the US treasury yields falling we expect the dollar to head lower and that in turn is expected to support a firmer gold price.

The post METALS MORNING VIEW 05/12: Metal prices consolidate while broader markets show weakness appeared first on The Bullion Desk.

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METALS MORNING VIEW 04/12: Metals prices rebound again after Monday’s rally ran into selling

Price gains inspired by the trade developments at the Group of Twenty (G20) summit over the weekend were sold into during afternoon trading on Monday December 3, but likewise the dips have been bought into again this morning.

Three-month base metals prices on the London Metal Exchange were up by an average of 0.5% on Tuesday morning, with all of the metals – bar nickel which was unchanged – in positive territory.

The fact the post-G20 reaction has not led to a huge spike higher means the uptrend may be more sustainable, especially as the dip has been bought into.

Volume across the complex has been above average with 7,536 lots traded as at 7.44am London time.

The precious metals were also stronger this morning with gains averaging 0.4%, helped by a weaker dollar and a stronger crude oil price.

In China this morning, the January contract prices for base metals on the Shanghai Futures Exchange were mixed, with copper off by 0.7% at 49,660 yuan ($7,193) per tonne and lead off by 0.3%, while the rest were up between 0.1% for aluminium and 1.1% for zinc.

Spot copper prices in Changjiang were down by 1.1% at 49,850-50,040 yuan per tonne and the LME/Shanghai copper arbitrage ratio was weaker at 7.91, compared with 7.94 on Monday – suggesting the LME is leading the stronger tone.

In other metals in China, the May iron ore contract on the Dalian Commodity Exchange was up by 1.8% at 472 yuan per tonne. On the SHFE, the June steel rebar contract was up by 1.3%.

In wider markets, spot Brent crude oil prices were stronger, up by 0.73% $62.32 per barrel – the recent low being $57.52 per barrel. The yield on US 10-year treasuries was weaker and has dropped below the 3% level to 2.9561%, while the German 10-year bund yield has dropped to 0.2980%. The weaker yields suggest investors expect the US Federal Reserve to slow the pace of interest rate rises.

The enthusiasm seen in Asian equity markets on Monday has faded – the CSI 300 was up 0.21% on Tuesday, but the other indices we follow were lower: the Nikkei (-2.39%), the ASX 200 (-1.01%), the Kospi (-0.82%) and the Hang Seng (-0.03%).

This follows strong performances in western markets on Monday; in the United States, the Dow Jones closed up by 1.13% at 25,826.43, while in Europe, the Euro Stoxx 50 was up by 1.32% at 3,214.99.

The dollar index is weakening, with weaker US Treasury yields no doubt weighing on sentiment – the index was recently quoted at 96.69. The other major currencies we follow are for the most part firmer: euro (1.1391), the Australian dollar (0.7382) and the yen (113.06), while sterling (1.2765) is consolidating.

The yuan has continued to rebound and was recently quoted at 6.8400 – this suggests confidence in the trade developments. The other emerging market currencies we follow are mixed, suggesting a degree of uncertainty, although the ringgit is stronger, probably reflecting the stronger oil price.

In data already out on Tuesday, Spanish unemployment fell for the first time since July in November, declining by 0.06% from a month earlier. Later, we have data on UK construction spending, the EU’s producer price index, there is an EU Economic and Financial Affairs Council meeting and data on US economic optimism. In addition, Bank of England governor Mark Carney, US Federal Open Market Committee (FOMC) member John Williams and UK Monetary Policy Committee member Gertan Vlieghe are speaking.

Despite the selling that capped Monday’s price spikes, the fact buying has been seen again this morning is encouraging and suggests sentiment has turned more positive. The JP Morgan global manufacturing purchasing managers’ index (PMI) held at 52.0 in November, suggesting the global economy is still expanding – albeit weakly – but this might now pick-up as the trade threat eases. We now wait to see if there is further follow-through buying on the back of the metals’ fundamentals. On balance, we expect a gradual switch to a ‘glass half full’ outlook, from the ‘glass half empty’ – one we have been in since June.

Gold prices are on the climb again and are a few dollars away from breaking above the October highs at $1,243.45 per oz. A weaker dollar and an escalation in US/Iran tensions, following Iran’s test-firing of a medium-range ballistic missile, are providing support. Silver is following gold’s lead, platinum remains weak, while at the other end of the spectrum, palladium prices remain strong having set fresh record highs on Monday.

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METALS MORNING VIEW 03/12: Metals react positively to G20 trade developments

Some progress at the Group of Twenty (G20) summit on US-China trade has given the three-month base metals prices on the London Metal Exchange a boost, up by an average of 1.4%.

The LME zinc price gained 1%, while copper was up 1.9% and recently quoted at $6,314 per tonne. Volume across the complex has, not surprisingly, been strong with 14,686 lots traded as at 6:53am London time.

The precious metals were stronger too with gains averaging 1.1%, helped by a weaker dollar and reports that Qatar is to leave Opec, which, combined with the trade developments, has led to a 5% bounce in crude oil prices.

In China this morning, the January contract prices for base metals were stronger by an average of 1.9%; led by a 3.4% rise in zinc, while copper was up 1.1% at 50,120 yuan ($7,266) per tonne.

Spot copper prices in Changjiang were up by 1.5% at 50,310-50,700 yuan per tonne and the LME/Shanghai copper arbitrage ratio was weaker at 7.94, suggesting the LME is leading the stronger tone.

In other metals in China, the May iron ore contract on the Dalian Commodity Exchange was up by 1.9% at 463 yuan per tonne. On the SHFE, the June steel rebar contract was up by 1.2%.

In wider markets, spot Brent crude oil prices had jumped by 5.06% this morning, to $62.09 per barrel – the recent low being $57.52 per barrel. The yield on US 10-year treasuries was firmer at 3.0447%, as was the German 10-year bund yield at 0.3400%, suggesting less risk-on in the markets.

Asian equity markets have reacted strongly to G20 developments with prices higher on Monday: the Nikkei (1.0%), the ASX 200 (1.84%), the Kospi (1.67%), the Hang Seng (2.40%) and the CSI 300 (2.77%).

This follows mixed performances in western markets on Friday; in the United States, the Dow Jones closed up by 0.79% at 25,538.46, while in Europe, the Euro Stoxx 50 was off slightly by 0.3% at 3,173.13.

The dollar index is weakening, but remains in mid-range and was recently quoted at 96.79. The other major currencies are for the most part firmer: euro (1.1376), the Australian dollar (0.7375) and sterling (1.2787), but the yen is weaker at 113.51, again suggesting a degree of risk-on.

The yuan has jumped and was recently quoted at 6.8906, while the other emerging market currencies we follow are mixed, most are firmer or little changed, while the rupee is weaker.

The economic agenda is busy with the release of manufacturing purchasing managers’ index (PMI) data, which is out across all regions. Japan’s reading came in at 52.2, up from a previous reading of 51.8 and China’s 50.2 just beat the 50.1 that was expected. Hopefully the respite in the trade war will help fuel an economic rebound in China and prevent the PMI slipping below the 50 level which would imply the economy is contracting. Other data that is out later includes US construction spending, US ISM manufacturing prices and US total vehicle sales.

In addition Federal Open Market Committee (FOMC) member Richard Clarida is speaking three times, and FOMC member Lael Brainard and UK Monetary policy committee member Andrew Haldane are also speaking.

The G20 developments have seen the base metals prices gap higher, key will now be what follow-through action there is. Indeed, the developments have removed the immediate fear of the negative situation escalating which should give the global economy and commodities time to reflect their fundamentals again, which we think should be bullish.

For now, with the global economy receiving a boost, the rising tide is lifting all the metals we follow and rising oil prices should also be bullish for gold/commodity prices, especially if investors start to get interested in buying into commodity baskets.

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METALS MORNING VIEW 30/11: Base metals prices firm despite disappointing China data

Three-month base metals prices on the London Metal Exchange were firm on the morning of Friday November 30 despite the release of weaker-than-expected economic data from China earlier in the day.

The three-month tin price led the gains with a 0.6% increase to $18,620 per tonne and was closely followed by zinc and nickel, which were both up by 0.4%. Copper and lead managed to eke out mild gains of 0.2%, with the former at $6,215 per tonne, while aluminium was unchanged. Still, overall sentiment in the LME base metals was fairly positive with prices up by an average of 0.3%.

With November drawing to an end and investors focusing on the weekend’s Group of Twenty (G20) summit in Argentina, trading volumes have been low this morning – only 3,012 lots had been traded across the LME three-month base metals as at 6.26am London time.

In the precious metals, demand for haven assets remains fairly muted despite the softer dollar of late. Gold and silver prices were unchanged at $1,224 and $14.30 per oz respectively, but platinum continues to underperform with a drop of 0.4% to $815.10 per oz.

Conversely, platinum’s sister-metal palladium recorded a fresh record high of $1,191 per oz earlier this morning – it was recently at $1,118.40 per oz.

In China, most of the January contract prices for base metals on the Shanghai Futures Exchange were up – the exceptions being aluminium and tin with falls of 0.7% and 0.1% respectively. Nickel and zinc recorded solid gains of 1.8% and 1.5% respectively, while copper and lead were more subdued with respective increases of 0.2% and 0.1%. On average, base metals prices on the SHFE were up by 0.5%.

Spot copper prices in Changjiang were a tad weaker, down by 0.1% to 49,760-49,800 yuan ($7,164-7,170) per tonne and the LME/Shanghai copper arbitrage ratio was at 7.96.

In other metals in China, the most-traded January steel rebar contract on the SHFE was off by 1.8%, while the SHFE June contracts for gold and silver were up a modest 0.4% and 0.3% respectively. The January iron ore contract on the Dalian Commodity Exchange (ZCE) edged up 5 yuan per tonne to 479 yuan per tonne.

In wider markets, spot Brent crude oil has attracted some bargain-buying near $60.00 per barrel this morning. In the bond market, US 10-year treasuries were slightly weaker, down by 0.07% at 3.0248 and similarly, the German 10-year bund yield was off by 0.36% at 0.3200.

The recent recovery in the US equity market has started to stall after it closed on a negative note on Thursday. Traders turned cautious amid fresh concerns that growth in the US economy has started to show signs of peaking. Sentiment was overshadowed by October’s weaker-than-expected pending home sales data. That said, Asian equity indexes were mostly higher this morning and largely ignored the overnight release of the negative Chinese economic data: Nikkei (0.4%), Topix (0.48%), Hang Seng (0.47%) and China CSI 300 (1.12%).

Following the sell-off on Wednesday, the dollar index has started to stabilize at 96.82. The other major currencies we follow were a tad weaker: the Australian dollar (0.7313), the euro (1.1384) and Sterling (1.2779).

It has been a busy start in terms of economic releases, with data already out showing China’s manufacturing and non-manufacturing purchasing managers’ index (PMI) data coming in well below market expectations at 50.0 and 53.4 respectively. In Japan, consumer confidence dipped to 42.9, from 43.0 previously and house starts were weaker than forecast at 0.3%. German data was mixed with the import price index for October up by 1%, beating an expected rise of 0.4%, while retail sales for the same month were down by 0.3% – against an expected 0.4% increase.

Later, we have the European Union’s headline and core flash consumer price index (CPI) and the Chicago PMI from the US. In addition, US Federal Open Market Committee member John Williams is due to speak.

The uncertainty surrounding this weekend’s G20 summit continues to dominate market focus. While base metals prices were largely up this morning, gains have been limited and should remain so until more direction emerges from G20 meetings. That said, any resolution from the summit would allow the base metals, which are generally in low ground, to stage an end-of-year rally, we feel. This is because a lot of the selling has run its course and a potential ceasefire or some type of framework to end the trade dispute between China and the US would likely attract pent-up demand from consumers looking to restock.

The precious metals, meanwhile, remain relatively quiet, though any tough rhetoric from either US President Donald Trump or his Chinese counterpart is likely to spark demand for haven assets. That said, platinum continues to struggle against the threat of US tariffs on automobile imports.

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METALS MORNING VIEW 29/11: Metals prices consolidate gains after Fed comments, focus shifts to G20

Three-month base metals prices on the London Metal Exchange were being pushed and pulled by cross currents this morning, Thursday November 29. Nickel, lead and tin showed gains averaging 0.4%, while copper, aluminium and zinc were down by an average of 0.4%. Copper was off by 0.4% at $6,230 per tonne.

Volume across the complex has been average with 5,189 lots traded as at 7.33am London time.

Wednesday’s more dovish tone from US Federal Reserve chairman Jerome Powell, saying that the central bank may soon be in a position to pause the interest rate hikes, had boosted confidence in the base metals market. As a result, base metals prices on the LME closed up with average gains of 1.4% on Wednesday, while equites rebounded, yields fell and the dollar weakened.

With the dollar weaker, the precious metals were for the most part firmer this morning; gold, silver and platinum prices were up by an average of 0.5%, with gold at $1,226.80 per oz, while palladium prices were consolidating.

The market is looking more confident this morning due to Wednesday’s Federal Reserve comments, but likewise it is still nervous about what developments there will be on trade at this weekend’s Group of Twenty (G20) summit, and so trade issues are likely to dominate for the rest of the week.

In China this morning, most of the January contract prices for base metals were firmer; led by a 1.2% rise in copper to 49,550 yuan ($7,124) per tonne, zinc, lead and nickel were up by an average of 0.7%, while aluminium and tin prices were down by 0.2%.

Spot copper prices in Changjiang were up by 1.3% at 49,670-49,860 yuan per tonne and the LME/Shanghai copper arbitrage ratio was weaker at 7.95 after 7.99 on Wednesday, suggesting the LME is leading the stronger tone.

In other metals in China, the January iron ore contract on the Dalian Commodity Exchange was up by 1.3% at 476 yuan per tonne. On the SHFE, the January steel rebar contract was off by 0.2%.

In wider markets, spot Brent crude oil prices were firmer this morning, up by 1.01% at $59.16 per barrel – the recent low being $58.42 per barrel. The yield on US 10-year treasuries was considerably weaker at 3.0180%, while the German 10-year bund yield was also weaker at 0.3355%.

Asian equity markets were mixed on Thursday: the Nikkei (0.39%), the ASX 200 (0.58%), the Kospi (0.28%), the Hang Seng (-0.92%) and the CSI 300 (-1.3%).

This follows stronger performances in western markets on Wednesday; in the United States, the Dow Jones closed up by 2.5% at 25,366.43, while in Europe, the Euro Stoxx 50 was up by 0.06% at 3,168.29. Powell’s comments came too late in the day to impact European equities, plus the European auto sector will still be concerned over whether President Donald Trump will impose a 25% tariff on imported vehicles.

The dollar index is weakening on the back of the Federal Reserve comments and was recently quoted at 96.65 – we wait to see if the comments turn out to be a trend changer for the dollar. Needless to say the other major currencies are firmer following the comments: yen (113.28), euro (1.1394), the Australian dollar (0.7330) and sterling (1.2831).

The yuan remains in low ground and was recently quoted at 6.9435, while the other emerging market currencies we follow are firmer due to the weaker dollar.

The economic agenda is busy – data already out shows French gross domestic product (GDP) growth unchanged at 0.4% and Spanish consumer price index (CPI) at 1.7%. Later there is data on German unemployment, UK lending and US releases that include personal income, spending and prices, initial jobless claims, pending home sales and natural gas storage. In addition, European Central Bank President Mario Draghi is speaking and this evening the latest US Federal Open Market Committee (FOMC) meeting minutes are released.

Wednesday saw the base metals gain some momentum which has boosted lead, aluminium, zinc and tin off recent lows, while nickel prices remain around the lows and copper is looking the best to try to break higher. Copper does, however, face considerable resistance on the charts between $6,296 and $6,394 per tonne – so with the uncertainty surrounding G20, we expect the upside will remained capped until the outcome of G20 is known.

Gold, like copper, is well placed to push higher and if there is follow-through enthusiasm about Powell’s comments then a weaker dollar could underpin a stronger gold price. Silver looks set to follow gold’s lead, while the platinum group metals may hold back as the auto market may be about to face stronger headwinds from tariffs.

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METALS MORNING VIEW 01/10: Mixed start to trading in low-volume market

In the precious metals this morning, spot gold prices were off by 0.3% at $1,189.00 per oz, palladium prices were off by 0.5%, while silver prices were little changed and platinum prices were up by 0.3%. This follows a general day of strength last Friday that saw gold, silver and platinum prices rise by an average of 1.3%, while palladium prices eased by 0.8%.

Silver was the star performer last Friday with prices putting in a strong performance – given the size of the gross short fund position there may well be further room for short-covering now that prices appear to have put in a base. The gold/silver ratio was recently at 1:81.4, having been out at 1:85 in recent weeks.

Three-month base metals prices on the London Metal Exchange were for the most part firmer, the exception being copper where prices were down by 0.4% at $6,233 per tonne. The rest were up between little changed for aluminium and 0.9% for lead.

With Chinese markets closed for the Golden Week holiday to mark the country’s National Day, volume has been light with 1,606 lots traded as at 07:12am London time.

This follows a day of general strength last Friday when the complex closed up by an average of 1.2%, led by a 3.3% rise in zinc prices.

In wider markets, spot Brent crude oil prices were higher by 0.41% and were recently quoted at $83.18 per barrel while the market gets nervous about whether other oil producers will be able to fill the gap caused by continuing US pressure on countries to rein in their imports of Iranian oil. The yield on US 10-year treasuries has firmed to 3.0715%, having been as high as 3.1% September 26. The German 10-year bund yield has firmed and was recently quoted at 0.4810%.

Asian equity markets were mixed on Monday with the Nikkei up by 0.52%, taking it to the highest since 1991, while the ASX 200 is down 0.57% and the Kospi is off 0.18%. This follows a mixed performance in western markets on Friday; in the United States, the Dow Jones closed up by 0.07% at 26,458.31, while in Europe, the Euro Stoxx 50 was down by 1.47% at 3,399.20 – the latter dragged down by concerns over Italy’s budget plans.

The dollar index continues to react favorably to the US rate rise with a move up to 95.25 and has done a good job in negating the weakness seen over the past six weeks or so.

With the dollar stronger and Europe facing issues on Brexit and Italy’s budget, the euro (1.1586) and sterling (1.3030) are weaker, as are the yen (113.95) and the Australian dollar (0.7207) is consolidating.

The emerging currencies we follow are for the most part consolidating; the exception is the Mexican peso that is stronger on the back of the new trilateral trade deal between the US, Mexico and Canada.

The economic agenda is extremely busy on Monday, with Tankan and purchasing managers’ index (PMI) data already out in Japan coming in weaker than previous readings. Later there is manufacturing PMI data out across Europe and the US, as well as data on German retail sales, Italian unemployment, UK lending, US construction spending and total vehicle sales. There is also a Eurogroup meeting and US Federal Open Market Committee member Raphael Bostic is speaking.

The base metals prices are looking quite diverse; zinc is the latest to break higher, while copper and nickel consolidate after their upside breaks on September 21. Lead seems to be mustering the energy to follow zinc, while aluminium and tin remain rangebound. With China on holiday this week, lower liquidity is likely to lead to choppy prices, but the trade deal between the US, Mexico and Canada is a positive development and that may instill some hope that other deals will follow.

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METALS MORNING VIEW 28/09: Some strength emerges in the metals after Thursday’s weakness

Three-month base metals prices on the London Metal Exchange were up across the board with gains averaging 0.4% on the morning of Friday September 28. But this follows a general down day on Thursday, when the complex closed down by an average of 1%.

This morning’s gains are ranged from little changed for aluminium and tin to up by 0.7% for nickel, with copper up by 0.4% at $6,205 per tonne.

Volume has been average with 5,686 lots traded as at 07:13am London time.

In the precious metals, spot gold prices were off by 0.1% at $1,182.95 per oz, while the more industrial precious metals were up between 0.2% for silver and platinum prices and 0.4% for palladium prices. Thursday’s action was polarized with gold, silver and platinum down by an average of 1.1%, while palladium bucked the trend by rising 1.5%.

In China, the base metals prices were divergent with the November zinc, November lead and January tin contracts up by an average of 0.9%, while the November contracts for copper, aluminium and nickel were down by 0.4%, 0.9% and 1% respectively. The November copper contract was at 50,170 yuan ($) per tonne.

Spot copper prices in Changjiang were down by 0.5% at 50,140-50,380 yuan per tonne and the LME/Shanghai copper arbitrage ratio is firmer at 8.09, after 8.07 on Thursday.

In other metals in China, the January iron ore contract on the Dalian Commodity Exchange was down by 1% at 494.50 yuan per tonne. On the SHFE, the January steel rebar contract was down by 2.6%, while the December gold and silver contracts were down by 0.8% and 0.7% respectively.

In wider markets, spot Brent crude oil prices were higher by 0.24% and were recently quoted at $81.48 per barrel. The yield on US 10-year treasuries has firmed to 3.0450%, having been as high as 3.1% on Wednesday. The German 10-year bund yield has weakened and was recently quoted at 0.4800%. The strength in the latter suggests safe-haven buying in Europe after Italy’s government agreed a higher budget, which will put it on collision course with Europe.

Asian equity markets were for the most part stronger on Friday: Nikkei (+1.33%), Kospi (-0.52%), the Hang Seng (+0.10%), the CSI 300 (+0.52%) and ASX200 (+0.43%). This follows a stronger performance in western markets on Thursday; in the United States, the Dow Jones closed up by 0.21% at 26,439.93, while in Europe, the Euro Stoxx 50 was up by 0.48% at 3,449.79.

The dollar index continues to react favorably to the US rate rise with a move up to 95.08 and has done a good job in negating the weakness seen over the past six weeks or so.

With the dollar stronger, the other major currencies we follow are weaker, especially the euro (1.1625) while Italy once again rocks the fiscal boat, sterling (1.3075), the Australian dollar (0.7215) and the yen has dropped through its 113.13-113.16 double bottom and was recently quoted at 113.38.

The yuan has also weakened and was recently quoted at 6.8845, while the emerging market currencies we follow are quite mixed and ranged between consolidating or strengthening. This suggests the latest dollar strength is more about other major currency market weakness and less about fresh emerging currency weakness.

The economic agenda is extremely busy on Friday, with data already out in Japan showing a strong improvement across the board – see table below for details. Data out later in Europe includes French consumer spending, consumer price index (CPI) data from France, Spain, Italy and the European Union, German unemployment and the United Kingdom’s current account, gross domestic product and business investment. US data includes personal income, spending and PCE prices, Chicago purchasing managers’ index (PMI) and revised University of Michigan consumer sentiment and inflation expectations. In addition, UK Monetary Policy Committee member David Ramsden is speaking.

The base metals prices are looking quite diverse, but rally attempts continue to struggle and higher prices are still attracting selling. Conversely, support seems to be in place – although in some metals it is looking more vulnerable than in others. The market action continues to be at odds with the LME data that is showing tighter spreads, some backwardations and across the board steady stock falls, with some stocks getting significantly low.

Overall, in this climate of uncertainty, consumers and would-be buyers may not feel in any hurry to chase the market higher – shorts on the other hand may be more nervous for the reasons mentioned above. As such, we expect choppy trading, especially with China on holiday next week.

Gold prices had been stuck sideways, but that changed on Thursday after the dollar’s rebound sent prices lower again. For once, silver prices are holding up slightly better than gold, as seen by the dip in the gold/silver ratio, while platinum is following silver’s lead. Palladium stands out alone, while its robust performance highlights its strong fundamentals.

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METALS MORNING VIEW 27/09: Metals prices mixed after initial weakness

Three-month base metals prices on the London Metal Exchange were for the most part weaker during early trading on Thursday September 28, but some strength emerged after trading got underway in Europe.

Tin was bucking the trend with 0.3% gain, while the rest of the metals were down by between 0.4% for aluminium and lead and 0.9% for zinc prices, with copper off by 0.8% at $6,236 per tonne.

Total volume across the complex has been average with 9,667 lots traded as at 08.01am London time.

With the US Federal Open Market Committee (FOMC) meeting and a 25 basis-point interest rate rise out of the way, the base metals markets may have a few days to reflect their fundamentals before trading becomes thinner as China goes on holiday next week, which will be followed by LME Week.

The precious metals were firmer, with prices up by an average of 0.4%. Given the US interest rate rise you would expect prices to be weaker, but with spot gold prices at $1,195 per oz, it appears the market had already fully priced in the rate increase.

In China, the base metals prices were mirroring those on the LME, with January tin prices up by 1%, while the rest were weaker by an average of 1.1%. The most actively traded November copper contract was down by 0.9% at 50,130 yuan ($7,290) per tonne.

Spot copper prices in Changjiang were down by 0.3% at 50,560-50,620 yuan per tonne and the LME/Shanghai copper arbitrage ratio is firmer at 8.07.

In other metals in China, the January iron ore contract on the Dalian Commodity Exchange was down by 0.4% at 502 yuan per tonne. On the SHFE, the January steel rebar contract was down by 1%, while the December gold and silver contracts were down by 0.4% and 0.2% respectively.

In wider markets, spot Brent crude oil prices were higher by 0.66% and were recently quoted at $82.20 per barrel. The yield on US 10-year treasuries has eased to 3.0339%, having been as high as 3.1% on Wednesday. The German 10-year bund yield has strengthened and was recently quoted at 0.5327%.

Asian equity markets were mainly weaker on Thursday: Nikkei (-0.99%), Kospi (+0.7%), the Hang Seng (-0.35%), the CSI 300 (-0.40%) and ASX200 (-0.18%). This follows a weaker performance in western markets on Wednesday; in the United States, the Dow Jones closed down by 0.40% at 26,385.28, while in Europe, the Euro Stoxx 50 was down by 0.51% at 3,415.56.

The dollar index has reacted favorably to the US rate rise with a move up to 94.58, but with the interest rate rise expected, it will be interesting to see if it holds on to its gains, especially because US President Donald Trump wants a weaker dollar and the trend since mid-August has been downward.

With the dollar stronger, most of the other major currencies we follow are weaker: the Australian dollar (0.7225), sterling (1.3113) and the euro (1.1699), although the yen is rebounding off a double bottom and was recently quoted at 112.58 – the double low being at 113.13-113.16.

The yuan has also weakened and was recently quoted at 6.8770, while the emerging market currencies we follow are quite mixed; the rupiah and ringgit were weaker, while the rest were either consolidating or showing some strength.

On the economic agenda, data already out in Germany showed GfK consumer climate edge up to 10.6 from a previous reading of 10.5. Later, there is European data that includes Germany’s consumer price index (CPI), the European Union’s M3 money supply, EU private loans and a European Central Bank (ECB) economic bulletin. Italy also has a 10-year bond auction. US releases include durable goods orders, final gross domestic product (GDP), GDP price index, goods trade balance, wholesale inventories, initial jobless claims, pending home sales and natural gas storage numbers. In addition, ECB president Mario Draghi and US Federal Reserve chair Jerome Powell are speaking.

The base metals are looking quite diverse; zinc is leading on the upside, but the metal’s prices need to clear resistance at $2,564 per tonne to suggest a break higher; copper and nickel prices are consolidating last week’s gains, but are holding up reasonably well; tin and aluminium are trading sideways, while lead is weaker. Key now will be whether there will be further short-covering ahead of the week long holiday in China.

Overall, in this climate of uncertainty, consumers and would-be buyers may not feel in any hurry to chase the market higher – shorts on the other hand may be more nervous, especially because spreads are tighter. As such, we expect choppy trading to continue.

Gold prices are stuck in a sideways trading. Given escalating trade tensions, rising oil prices and some record breaking US equity markets of late, it may be that safe-havens will be needed again before too long and at these price levels gold may look a cheaper safe-haven. Palladium led the more industrial precious metals higher last week, but while it continues to strengthen, platinum and silver are now consolidating their gains.

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METALS MORNING VIEW 25/09: Metals dip while China takes advantage of higher prices

With Chinese participants returning from holiday, they have taken to selling into the recent metal price gains, with the three-month base metals prices on the London Metal Exchange for the most part weaker during morning trading on Tuesday September 25.

Nickel bucked the general weakness with a 0.3% gain and tin was untraded, while the rest of the LME base metals were down by an average of 0.6%. Copper fell by 0.8% to $6,245 per tonne.

Total volume across the complex has been high with 11,609 lots traded as at 06.13am London time.

The precious metals gave a mixed performance this morning; gold and silver spot prices were little changed, with the former at $1,199.15 per oz, palladium prices were up by 0.2% and platinum prices were up by 0.5%. Palladium remains the only precious metal with an upside agenda, with prices trading at multi-month highs.

In China, the base metals prices were similarly mixed; the November contracts for copper and nickel were higher by around 1%, with copper at 50,170 yuan ($7,315) per tonne, the November zinc contract was little changed, while the November aluminium and lead contracts were down by 0.4% and 0.7% respectively and the January tin contract was off by 0.2%.

Spot copper prices in Changjiang were up by 0.9% at 50,390-50,620 yuan per tonne and the LME/Shanghai copper arbitrage ratio was at 8.04.

In other metals in China, the January iron ore contract on the Dalian Commodity Exchange was down by 1% at 500.50 yuan per tonne. On the SHFE, the January steel rebar contract was down by 1.2%, while the December gold and silver contracts were down by 0.3% and 0.5% respectively.

In wider markets, spot Brent crude oil prices were little changed but at high levels and were recently quoted at $81.35 per barrel. The yield on US 10-year treasuries continues to firm and was recently quoted at 3.0975%, which suggests the market is expecting another rate rise when the US Federal Open Market Committee (FOMC) meets on Wednesday. The German 10-year bund yield has strengthened and was recently quoted at 0.5082%.

Asian equity markets were for the most part weaker on Tuesday: Nikkei (+0.10%), Kospi (closed), the Hang Seng (-1.62%), the CSI 300 (-1.12%) and ASX200 (-0.10%). This follows a weaker performance in western markets on Monday that were rattled by an escalation in global trade tensions, with China saying it would not join trade talks unless the United States stops threatening to increase tariffs. In the US, the Dow Jones closed down by 0.68% at 26,562.05, while in Europe, the Euro Stoxx 50 was down by 0.59% at 3,410.44.

The dollar index is consolidating above its recent low and was recently quoted at 94.31, the low on September 21 was 93.81. The move below support at 94.30 had triggered a bearish Head-and-Shoulder Pattern and the rebound is now testing the breakdown level. We may not get a clear direction for the dollar until after the FOMC rate decision and statement on Wednesday. Given US President Donald Trump wants a weaker dollar and the potential damage the trade disputes are having on global confidence, it may be that the FOMC is seen to be less hawkish in Wednesday’s statement.

With the dollar consolidating, most of the other major currencies we follow are consolidating too: the Australian dollar (0.7244), sterling (1.3107) and the euro (1.1747), although the yen continues to weaken (112.86).

The yuan has also weakened and was recently quoted at 6.8635 and most of the emerging market currencies we follow are either weakening or are consolidating recent gains. The exception is the Russian rouble that is strengthening, no doubt benefitting from the stronger oil price.

On the economic agenda, data already out in Japan showed the services producer price index (PPI) rise 1.3%, after a previous increase of 1.1%. Later, there is the German wholesale price index (WPI) and US releases that include two house price indices, consumer confidence and the Richmond manufacturing index. In addition, UK Monetary Policy Committee member Gertjan Vlieghe is speaking.

We have expected the rebounds to be nervous while the trade disputes linger and that has been the case. What we have seen is some initial short-covering and there is likely to be more to be done, but while the rallies struggle to attract follow-through buying, the shorts may not feel too vulnerable.
Also in this climate of uncertainty, consumers and would-be buyers may not feel in any hurry to chase the market higher. As such, we expect choppy trading to continue. With a week-long holiday in China in early October and with LME Week following that, liquidity may tighten up and that could increase the risk of some fast moving markets.

Longer term, we do favor the upside from these levels, but some progress on trade talks is likely to be needed before the confidence really returns.

Gold prices are stuck in a sideways trading pattern and we wait to see the next direction for the dollar to see which way gold prices travel from here. Given escalating trade tensions, rising oil prices and some record breaking US equity markets, it may be that safe-havens will be needed again before too long and at these price levels gold may look a cheaper safe-haven. Silver remains weak with the gold/silver ratio at 1:84, palladium is standing out as the precious metal being driven by strong fundamentals and platinum seems to be getting a boost having been oversold.

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METALS MORNING VIEW 24/09: Metals prices shake off early weakness

Three-month base metals prices on the London Metal Exchange were initially unchanged to weaker on the morning of Monday September 24, with prices down by an average of 0.5%. Trading had been quiet with Chinese and Japanese markets closed for holidays, but prices firmed after European trading picked up.

Nickel led the decline with a 1.4% drop, followed by lead and zinc – which were off either side of 0.5%. The rest of were little changed, with copper at $6,355 per tonne.

Volume across the complex has been low with 3,639 lots traded as at 07.37am London time.

This follows a strong performance last Friday which was largely driven by short-covering. Nickel and copper led the rebounds with gains of 4.9% and 3.6% respectively.

The precious metals were weaker across the board with prices down between 0.3% and 0.6%, with spot gold prices at $1,195.50 per oz. A rebound in the dollar has weakened sentiment.

In wider markets, spot Brent crude oil prices were back above $80 per barrel and were recently quoted at $80.35, driven higher after Saudi Arabia and Russia seem in no hurry to raise output. The yield on US 10-year treasuries has eased and was recently quoted at 3.0677%. The German 10-year bund yield has also eased and was recently quoted at 0.4530%.

Most Asian equity markets are closed on Monday, but the Hang Seng is off by 1.78% and the ASX 200 is down by 0.12%.This follows a strong performance in western markets last Friday; in the United States, the Dow Jones closed up by 0.32% at 26,743.50, with the index earlier in the day setting a fresh record high at 26,769.16, while in Europe the Euro Stoxx 50 was up by 0.81% at 3,430.81.

The dollar index is rebounding from the weakness seen at the end of last week – it was recently quoted at 94.32 after a low of 93.81 last Friday. On the chart, the index has triggered a bearish Head-and-Shoulder Pattern, the rebound is now testing that breakdown level.

With the dollar firmer, most of the other major currencies we follow are consolidating recent gains: the Australian dollar (0.7259), the yen (112.51) and the euro (1.1730), although sterling is weaker at 1.3073.

On the economic agenda there is data on German Ifo business climate, Confederation of British Industry (CBI) industrial order expectations from the United Kingdom and a Bank of England Financial Policy Committee statement. In addition, European Central Bank President Mario Draghi is speaking.

Most of the base metals accelerated higher on Friday and the move seems to have been driven by short-covering, which was something the market was on the lookout for. With the trade tensions continuing, we wait to see if a fully-fledged rebound can get underway ahead of a trade agreement, but the stronger tone may well unnerve more of the shorts which could lead to further short-covering rallies.

Longer term, we do favor the upside from these levels.

Gold prices are struck in a sideways range either side of $1,200 per oz. The more industrial-based precious metals have been able to rally, but they are consolidating gains this morning as is the metals complex as a whole. For now we would watch the dollar, but with a US Federal Open Market Committee statement on Wednesday and high expectations for a rate rise, gold prices may face a headwind until after the rate decision.

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METALS MORNING VIEW 21/09: Metals see follow-through buying, weaker dollar providing support

Three-month base metals prices on the London Metal Exchange were once again higher across the board by an average of 0.5% on the morning of Friday September 21. This follows Thursday’s generally bullish performance that saw the base metals complex close with gains averaging 0.7%.

Nickel and copper led on the upside this morning with gains of 1.3% and 0.9% respectively, with the red metal recently quoted at $6,173 per tonne.

Volume across the complex has been high with 11,481 lots traded as at 07.06am London time – price gains on high volume bode well.

The precious metals were stronger too with prices up by an average of 0.4%, with spot gold prices up by 0.2% at $1,209.20 per tonne. The drop in the dollar is no doubt helping sentiment.

In China, the base metals prices were for the most part stronger this morning, the exception was lead where the October contract was down by 0.5%, while the rest were firmer. November aluminium was up by 0.5%, the rest of the metals were up between 1.1% for copper and 1.9% for nickel. The most actively traded November copper contract was recently quoted at 49,970 yuan ($7,294) per tonne.

Spot copper prices in Changjiang were up by 0.2% at 49,870-50,200 yuan per tonne and the LME/Shanghai copper arbitrage ratio was at 8.10.

In other metals in China, the January iron ore contract on the Dalian Commodity Exchange was down by 0.1% at 502 yuan per tonne. On the SHFE, the January steel rebar contract was down by 0.1%, while the December gold and silver contracts were up by 0.3% and 1.7% respectively. Silver prices have been climbing at a faster pace than gold prices for the second consecutive day now.

In wider markets, spot Brent crude oil prices were recently quoted at $78.92 per barrel, up by 0.36% this morning, but prices are down from where they were at a similar time on Thursday when they were quoted at $79.67 per barrel. The yield on US 10-year treasuries continues to strengthen and was recently quoted at 3.0759%, which suggests the market is expecting another rate rise when the US Federal Open Market Committee meets next week. Indeed the market expects a 92% chance of a 25 basis point rise to 2.25%. The German 10-year bund yield has eased and was recently quoted at 0.4760%.

Asian equity markets were for the most part stronger on Friday: Nikkei (+0.82%), Kospi (+0.68%), the Hang Seng (+1.25%) and the CSI 300 (+2.54%). This follows a strong performance in western markets on Thursday in the United States; the Dow Jones closed up by 0.95% at 26,656.98, with the index earlier in the day setting a fresh record high at 26,697.49, while in Europe the Euro Stoxx 50 was up by 1.03% at 3,403.12.

The dollar index has broken below support at 94.30 and was recently quoted at 93.96. On the chart it has triggered a bearish head-and-shoulder pattern. The break lower is expected to lend support to the metals, many of which seem to be looking for an excuse to rally from oversold levels.

With the dollar weaker, most of the other major currencies we follow are strengthening: the Australian dollar (0.7292), sterling (1.3253) and the euro (1.1779), although the yen remains weak at 112.84.

The yuan is slightly firmer, and was recently quoted at 6.8360, and most of the emerging market currencies we follow are rebounding after recent weakness. This suggests a degree of risk-on is returning.

On the economic agenda, data already out in Japan has generally shown some strength, compared with previous readings. Data out later includes flash manufacturing and services purchasing managers’ index (PMI) releases which are out across Europe and the United States, as well as UK data on public sector borrowing and the Bank of England quarterly bulletin.

The base metals are looking well placed to extend gains having recently put in and tested support since the mid-August lows. The combination of oversold markets, a weakening dollar, strong equities and an apparent return of risk-on sentiment in emerging markets all bode well for the metals.

The fact equities are strong despite the continuing uncertainty over global trade tensions and Brexit, either suggests a lot of complacency, or confidence that eleventh-hour deals will be sorted. Whether fully fledged rebounds can get underway ahead of a trade agreement remains to be seen, but a stronger tone may well unnerve some of the shorts that could lead to short-covering rallies.

Longer term, we do favor the upside from these levels.

Gold prices are also looking firmer and well placed to rebound and the weaker dollar may well fuel that. The other precious metals may well benefit from a firmer gold as well as the stronger industrial metals.

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PLATINUM TODAY: Rebound showing signs of stalling

 

Outlook: Short term: Medium term: Long term: Resistances: R1 795 20 DMA R2 803 40 DMA R3 846 100 DMA R4 857 Jun 22 lows R5 901 200 DMA R6 924 DTL from Aug 2011 high Support: S1 932 Mar 2017 low S2 901 200 DMA S3 873 Dec 2017 lows S4 811 Jan 2016 low S5 803 40 DMA S6 S7 795 20 DMA 745 Oct 2008 low Stochastics: Fast line stalled Legend:   BB – Bollinger band COT – commitment of traders DMA – Daily moving average Fibo – Fibonacci retracement level HSL – horizontal support line SL – support line MACD – moving average convergence divergence DTL – downtrend line UTL – uptrend line H&S – head-and-shoulder pattern RSI – relative strength index
Analysis Platinum has staged a modest short-covering rebound from a low of $766 per oz on September 4, reclaiming the 20, 40 and 55 DMAs, which are likely to provide immediate support. Momentum indicators remain supportive; the RSI has risen to 60 and stochastics remain positive, although the fast line has flattened, reflecting the stalled price momentum. Prices have run into overhead resistance ahead of the DTL from the January 25 high, which stands ahead of the 100 DMA at $846 per oz. Further support is pegged at the October 2008 low at $745 per oz, but the large descending triangle on the monthly chart (inset), suggests platinum could extend lower, with the next support around $600 per oz. Macro drivers Short-covering has featured among Nymex speculators; Commitments of Traders data showed Nymex funds cut their open shorts by 2,642 contracts or 5.1% in the week to September 11. Despite this, current positioning remains bearish as net length stands at -10,976 contracts. Despite the price rout, there has been only limited evidence of dip-buying among investors. Exchange-traded fund (ETF) holdings total 2.370 million oz compared with 2.257 million oz in early July. Despite slowing sales in the United States and China, the world’s two-largest vehicle markets, light vehicle sale globally continue to carry positive momentum rising 2.7% year on year in August, according to LMC Automotive. Sales globally were up 3.1% year on year in January-August. Platinum demand has suffered as a result of falling demand for diesel-engine vehicles, sales of which dropped 16% in January-June compared with same period of last year, according to the European Automobile Manufacturers’ Association (ACEA). Autocatalyst demand also faces potentially huge headwinds in the long term, resulting from the electric vehicle revolution. The impact of weaker demand and robust supply are set to keep the market in a surplus, which the World Platinum Investment Council (WPIC) forecasts will total 295,000 ounces in 2018, up from the 180,000-oz surplus forecast in May. Impala Platinum, the world’s second-largest platinum producer, plans to cut future production by 30% over the next two years following its strategic review. Impala will close a total of five mines, cutting annual production to 520,000 oz from around 750,000 oz currently. The Association of Mineworkers and Construction Union has threatened industrial action in response, as well as calling on the government to nationalize the five mine shafts that Impala has proposed closing. Other producers are in the process of restructuring their operations. Lonmin is in the process of closing old mines and developing newer, lower-cost operations. Yet greater supply restraint is necessary to break the weak price sentiment. Conclusion A modest short-covering rebound is underway and given the scale of fund shorts could fuel further gains. But failure to vault DTL resistance around $830 per oz and the 100 DMA risks renewing bearish sentiment, particularly in view of the negative fundamental backdrop. We maintain a breach below the October 2008 low at $745 per oz risks a deeper retracement towards $600 per oz.
All trades or trading strategies mentioned in the report are hypothetical, for illustration only and do not constitute trading recommendations.

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METALS MORNING VIEW 20/09: Metals prices firmer, but light volumes so far

Three-month base metals prices on the London Metal Exchange were higher across the board by an average of 0.7% on the morning of Thursday September 20. For now, the market seems to be grateful that the latest round of tariffs from the United States stood at 10% and not the 25% initially threatened.

Lead and zinc were the outperformers with gains of 1.1%, followed by copper, aluminium and nickel which were up between 0.5% and 0.5%. Tin was the laggard with an increase of 0.3%.

Volume across the complex has been low with 3,952 lots traded as at 06.41am London time – price gains on low volume do not necessarily bode well.

Gold prices were slightly firmer, up by 0.1% at $1,204.95 per oz, while the more industrial precious metals of silver, palladium and platinum were up between 0.4% and 0.5%.

In China, the base metals prices were also up across the board on the Shanghai Futures Exchange; the most actively traded November copper contract price was up just 0.1% at 49,510 yuan ($7,223) per tonne, but the rest were stronger with gains between 0.6% for November aluminium and 2.2% for November zinc.

Spot copper prices in Changjiang were down by 0.2% at 49,850-49,980 yuan per tonne and the LME/Shanghai copper arbitrage ratio was at 8.09.

In other metals in China, the January iron ore contract on the Dalian Commodity Exchange was down by 1% at 504 yuan per tonne. On the SHFE, the January steel rebar contract was up down by 0.7%, while the December gold and silver contracts were up by 0.3% and 1.3% respectively.

In wider markets, spot Brent crude oil prices have strengthened and were recently quoted at $79.67 per barrel, up by 0.49% this morning. The yield on US 10-year treasuries continues to firm and was recently quoted at 3.0600%, which suggests the market is expecting another rate rise when the US Federal Open Market Committee meets next week. Indeed the market expects a 92% chance of a 25 basis point rise to 2.25%. The German 10-year bund yield was also stronger at 0.4800%.

Asian equity markets were for the most part stronger on Thursday; the exception was the ASX 200 that was down 0.31%, while the rest were up: Nikkei (+0.20%), Kospi (+0.78%), the Hang Seng (+0.21%) and the CSI 300 (+0.11%). This follows a firmer performance in western markets on Wednesday; in the United States, the Dow Jones closed up by 0.61% at 26,405.76, while in Europe the Euro Stoxx 50 was up by 0.30% at 3,368.56.

The dollar index is under pressure and is looking vulnerable. It was recently quoted at 94.50, with recent support in the 94.30 to 94.43 range. A break lower could lend support to the metals, many of which seem to be looking for an excuse to rally from oversold levels.

With the dollar weaker, most of the other major currencies we follow have an upside bias, especially the Australian dollar (0.7258), while sterling (1.3146) and the euro (1.1682) are consolidating in recent high ground, although the yen remains weak at 112.16.

The yuan is treading water around recent levels and was recently quoted at 6.8488 and most of the emerging market currencies we follow are rebounding after recent weakness. This suggests a degree of risk-on is returning.

On the economic agenda there is data on UK retail sales along with US releases including the Philadelphia Fed Manufacturing Index, initial jobless claims, consumer confidence, leading indicators, existing home sales and natural gas storage. In addition, German Bundesbank President Jens Weidmann is speaking.

Once again, most of the base metals seem to be getting some lift off of recent lows, with the recent lows holding above those reached in mid-August. This suggests bases have been built and buying dominates at the lower numbers – we have to see whether the sellers still dominate at the higher numbers. Physical trading is reportedly strong, seasonally this is also a strong time of year for industrial demand and there are reportedly large short positions in the metals – so prices have numerous reasons to rise, but sentiment remains depressed by the continuing trade disputes.

The fact the dollar is looking weak and the market has not had too negative a reaction to the latest round of tariff increases suggests a lot of the bad news is in the price. Until the trade disputes are settled, which may not be until around the US mid-term elections, it may be hard for the metals to reflect their tightening fundamentals. As such for now, we expect choppy trading with attempted rallies, short-covering and further shorting into strength.

Longer term, we do favor the upside from these levels.

Gold prices have followed in the tracks of the base metals and prices are consolidating above recent lows, as are silver prices. Palladium prices lead on the upside and platinum prices are following its lead. The gold/silver ratio remains weak at 84.30, should gold prices start to move higher, we would expect silver prices to follow at a faster pace.

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METALS MORNING VIEW 18/09: Metals market relieved new US tariffs were not more damaging

Three-month base metals prices on the London Metal Exchange were for the most part firmer this morning, Tuesday September 18. This despite US President Donald Trump imposing 10% tariffs on a further $200 billion of Chinese exports – the market no doubt relieved it was not 25%.

The exception to the stronger showing by the LME base metals was lead, which was down by 0.7%. The rest of the complex saw of gains of between 0.1% for tin and 0.7% for zinc, with copper up by 0.2% at $5,964 per tonne.

Volume across the complex has been above average with 9,815 lots traded as at 07.02am London time.

The precious metals were firmer with gold and silver prices up between 0.1% and 0.2% with spot gold at $1,199.45 per oz, while platinum prices were up by 0.9% and palladium prices were up by 0.3%.

In China, base metals prices were mixed on the Shanghai Futures Exchange, November copper and zinc were up by 0.7% and 1.5% respectively, with copper at 48,480 yuan ($7,060) per tonne, while the rest were down between 0.2% for tin and 1.3% for nickel.

Spot copper prices in Changjiang were up by 1.3% at 48,710-49,030 yuan per tonne and the LME/Shanghai copper arbitrage ratio was at 8.11.

In other metals in China, the January iron ore contract on the Dalian Commodity Exchange was up by 1% at 506.50 yuan per tonne. On the SHFE, the January steel rebar contract was up by 0.6%, while the December gold and silver contracts were little changed.

In wider markets, spot Brent crude oil prices have weakened and were recently quoted at $77.67 per barrel, down by 0.33% this morning. The yield on US 10-year treasuries was at 3.0044%, and the German 10-year bund yield was at 0.4600%.

Asian equity markets were for the most part stronger on Tuesday, again suggesting the tariff changes could have been worse: Nikkei (+1.41%), Kospi (+0.26%), the Hang Seng (+0.19%) and the CSI 300 (+1.52%), although the ASX 200 was down 0.38%. This follows a mixed performance in western markets on Monday; in the United States, the Dow Jones closed down by 0.35% at 26,062.12, while in Europe the Euro Stoxx 50 closed up by 0.04% at 3,346.11.

The dollar index is under pressure and is looking vulnerable. It was recently quoted at 94.44, with recent support in the 94.35 to 94.43 range. A break lower could lend support to the metals, many of which seem to be looking for an excuse to rally from oversold levels.

With the dollar weaker, most of the other major currencies we follow are either climbing, or looking to push through resistance: sterling (1.31.58), the euro (1.1705), the Australian dollar (0.7215), although the yen is weakening 112.21.

The yuan is treading water around recent levels and was recently quoted at 6.8359 and most of the emerging market currencies we follow are consolidating after their recent significant weakness.

The economic agenda is light today with data on US housing and long term treasury international capital (TIC) purchases. In addition, European Central Bank President Mario Draghi is speaking.

The base metals seem to be base building. The lows in mid-August were followed by rebounds that stalled and prices have since retreated to test the quality of underlying buying, which seems to be good, as for the most part the support levels have held. The exception has been nickel, where the August lows gave way.

The fact the dollar is looking weak and the market has not yet had too negative a reaction to the latest round of tariff increases, suggests a lot of the bad news is in the price, although should China retaliate the market may think again. Until the trade disputes are settled, which may not be until after the US mid-term elections, it may be hard for the metals to reflect their tightening fundamentals. As such for now, we expect choppy trading with attempted rallies, short-covering and further shorting into strength.

Longer term, we do favor the upside from these levels.

Gold prices have followed in the tracks of the base metals and prices are consolidating above recent lows, as are platinum prices. Palladium prices are showing relative strength in line with their fundamentals, while silver continues to struggle with the gold/silver ratio out at 84.8.

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METALS MORNING VIEW 13/09: Short-term buying returns on easing trade tensions, weaker dollar

Following a strong close in the previous session, the three-month base metals prices on the London Metal Exchange were mostly consolidating their recent gains during early trading on Thursday September 13.

Copper and lead were largely unchanged, while the rest of the complex has consolidated lower; aluminium (-0.5%) led the decline, closely followed by zinc (-0.4%), while nickel and tin were both down by 0.1%. As a result, the overall market configuration of the LME base metals was a touch weaker this morning, down by 0.2% on average.

Volume has been low with a total of 3,309 lots traded across the LME base metals complex as at 6.25am London time this morning. This compares with 3,942 lots and 4,867 lots traded at roughly the same time on Tuesday and Wednesday respectively.

In the precious metals space, some selling has emerged in gold and silver, with both metals’ prices down by 0.1%. The more industrial precious metals of platinum and palladium fared better, with prices up by 0.7% and 0.1% respectively.

With the United States keen to get China back to the negotiating table and the postponement of an additional $200 billion worth of tariffs on Chinese goods, a relief rally got underway across the base metals traded on the Shanghai Futures Exchange this morning.

Nickel was the outperformer of the SHFE base metals, with its most-traded November contract rising by 2.4% to 103,960 yuan ($15,136) per tonne, with the November copper and October zinc contracts close behind with gains of 2% and 1.7% respectively. The October lead contract secured an increase of 0.5%, while the November aluminium and January tin contracts bucked the general strength to drop by 0.5% and 0.2% respectively. On balance, the SHFE base metals achieved a solid 1% gain.

Spot copper prices in Changjiang were up by 1.5% at 48,550-48,690 yuan per tonne and the LME/Shanghai copper arbitrage ratio has dipped lower to 7.25.

In other metals in China, the January iron contract traded on the Dalian Commodity Exchange rose 2% to 499 yuan per tonne. On the SHFE, the December gold and silver contracts ticked up by 0.5% and 0.6% respectively.

In wider markets, the spot Brent crude oil price has retreated lower from its September high at $80.09 per barrel, it was down by 0.46% to trade at $79.31 per barrel this morning. In the bond market, the yield on US 10-year treasuries was up by 0.16% to 2.9663, while the German 10-year bund yield was steady at 0.4000%.

Wednesday’s positive close for equities in the US and Europe has boded well for their Asian counterparts this morning. The Dow Jones Index closed up by 0.11% on Wednesday, while the S&P 500 Index managed to eke out a mild gain of 0.04%. In Europe, the Euro Stoxx 50 Index ended yesterday up by 0.45%, while the FTSE 100 Index registered a gain of 0.55%.

As such, risk-on sentiment has filtered through to the Asian indices this morning; the Nikkei 225 gained 0.97%, Topix rose by 1.1%, the Hang Seng Index jumped 1.54% and some bargain buying returned to China’s CSI 300 Index, which ticked up by 0.2%. The ASX 200 Index was an exception to the stronger showing in Asia, with a decline of 0.76% this morning.

A weaker dollar is a tailwind for the commodity sector, with both base and precious metals benefitting from this weakness. The dollar index was trading below 95.00 this morning and based on its daily technical configuration, further downside could emerge if the potentially bearish Head and Shoulder Formation is triggered.

It is a busy day on the economic front, with Japan core machinery orders up by a solid 11%, but the country’s producer price index (PPI) was below expectations at 3%. Data from the European Union on Thursday will focus on consumer prices from Germany and France, while the Bank of England (BoE) will report on its official bank rate, asset purchase facility and provide a summary on its monetary policy. Brexit remains the biggest factor that will continue to undermine the BoE’s ability to normalize rates. Later on Thursday, we have consumer prices and unemployment claims from the US.

The US’ latest invitation for China to resume trade talks has provided much-needed relief for base and precious metals. With so much negativity generated by the escalating trade tensions between the two countries, the move was a welcomed sign in the market. This again highlights how sensitive the metals remain to macro risk events, which seemingly continue to trump fundamentals. The base metals complex has so far managed to keep a hold of the gains made on Wednesday, but the big question that remains is if they can sustain the rebound momentum or whether this is just another short-term relief rally that will soon fizzle out?

The same view can be applied to the precious metals. As the dollar index retreats lower, gold and silver prices have managed to bounce higher. We said before that at these low prices, investors may well turn to these metals as a relatively cheap haven asset at a time when global market confidence remains fragile.

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METALS MORNING VIEW 12/09: Base metals prices recover, but trade jitters linger

Three-month base metals prices on the London Metal Exchange were in a steadier tone so far on Wednesday September 12, after they closed broadly lower on Tuesday amid dollar strength and rising trade war concerns.

 Lead (+0.7%) and sister metal zinc (+0.5%) were leading the gains, with aluminium and copper up by more modest amounts of 0.3% and 0.1% respectively, while nickel (-0.1%) and tin (-0.5%) were in negative territory.

Trading volumes have been relatively light this morning, with 4,867 lots traded across the LME base metals as at 6.35am London time.

The precious metals, meanwhile, remained on the defensive, with the complex down by an average of 0.2% this morning. A firm dollar continues to create headwinds; data from the United States on Tuesday continues to fuel expectations for monetary tightening by the US Federal Reserve after job openings reached a record high and supported wage growth expectations.

In China, the base metals prices on the Shanghai Futures Exchange were mixed with zinc (+1.5%), nickel (+0.7%), lead (+0.3%) and copper (+0.2%) in positive territory, while aluminium (-0.2%) and tin (-0.4%) weakened.

In other metals in China, the January iron ore contract on the Dalian Commodity Exchange dropped by 0.7% to 492 yuan ($72) per tonne. On the SHFE, January steel rebar contract was down by 1.4% at 4,039 yuan per tonne, while the December gold contract was up by 0.1% and the December silver contract was down by 0.2%.

In wider markets, spot Brent crude oil prices were up by 0.4% at $79.41 per barrel, bolstered by supply disruption concerns.

Equities in Asia remained under pressure on Wednesday, testing multi-month lows as the threat of escalating trade tensions continue to undermine investor confidence; the Nikkei 225 was down 0.4%, with similar falls in the CSI 300 (-0.3%), Hang Seng (-0.2%) and ASX 200 (-0.1%).

In currencies, the dollar remains well bid against its major peers despite reports Chinese authorities intend to seek permission from the World Trade Organization to sanction the US for failing to comply with a ruling that deemed some of its anti-dumping rules to be illegal.

Economic data overnight showed consumer sentiment in Australia slowed in September following the rise in mortgage rates and political instability. Industrial production is due from the Eurozone ahead of figures from the US forecast to show producer prices rose 0.2% in August. The core producer price index (PPI) is seen unchanged at 0.2%. In addition, the US Federal Reserve will publish its latest Beige Book.

While the base metals were in a firmer mood on Wednesday, the complex is still struggling to hold on to any meaningful price gains while the market awaits some clarity on the US trade position. If US President Donald Trump follows through with his threat of fresh tariffs on Chinese goods another period of risk-off is likely to follow.

In the precious metals, lower prices are starting to attract stronger demand for coins and bars among individual retail investors. For the moment, rising real interest rates continue to deter institutional investors, although in view of the elevated fund short exposure, a modest relief rally could emerge after next Federal Reserve meeting on September 26. Another round of tariffs and signs of emerging market contagion could be the catalyst to increase demand for haven assets.

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METALS MORNING VIEW 11/09: Base metals prices find short-term support amid simmering trade tensions

Three-month base metals prices on the London Metal Exchange were mostly stronger during morning trading on Tuesday September 11.

Zinc and tin led the advance with rises of 0.6%, followed by gains of 0.4% and 0.2% in aluminium and copper respectively. Nickel was largely flat, while lead dropped by 0.4% to $2,010 per tonne. Still, the overall configuration of the LME base metals complex was positive, with an average gain of 0.2%.

Volume was below average, however, with only 3,942 lots having been traded across the complex as at 6.09am London time.

The precious metals were split this morning, with spot gold and spot silver prices down by 0.2% and 0.1% respectively. The more industrial precious metals were stronger, however, with platinum and palladium prices up by 0.5% and 0.3% respectively.

In China, base metals prices on the Shanghai Futures Exchange were mixed. On the downside were the most-traded October lead and zinc contracts with falls of 1.2% and 0.7% respectively, which was enough to offset the gains made by its peers. Nickel was the outperformer of the SHFE complex this morning, with the metal’s most-traded November contract rising 0.7% to 102,510 yuan ($14,942) per tonne. The rest were also up but to lesser extents, with the January tin contract up by 0.5%, the October copper contract up by 0.4% and the October aluminium contract edging 0.2% higher.

Spot copper prices in Changjiang were up by 0.2% at 47,850-47,940 yuan per tonne and the LME/Shanghai copper arbitrage ratio was at 8.13, compared with 8.09 on September 7.

In other metals in China, the January iron ore contract traded on the Dalian Commodity Exchange was down by 0.7% to 494.50 yuan per tonne. On the SHFE, the December gold and silver contracts were both up by 0.1%, while the January steel rebar contract dipped by 2.2% 4,161 yuan per tonne, with the latter retreating amid rising concerns that the Chinese economy has started to cool.

In wider markets, a decent level of bidding was seen in Brent crude oil this morning, with spot prices up by 0.35% at $77.55 per barrel. In bonds, the yield on US 10-year treasuries was firmer this morning at 2.9369%, while the German 10-year bund yield was flat at 0.4027%.

Western equities gave a mixed performance on Monday; in the United States the Dow Jones ended the day down 59 points or 0.23%, while the S&P500 managed to secure a marginal gain of 0.19%. European equities had a better day on Monday, with the Euro Stoxx up by 0.46% to 3,309 by yesterday’s close. Asian equities were broadly firmer this morning, with the Nikkei up by a solid 1.19%, Topix 0.62% higher and the ASX 200 gaining 0.64%. But simmering trade tensions between China and the US remain a cause for concern among investors, keeping buyers on the sidelines in certain markets, which saw the likes of the Hang Seng and CSI 300 decline this morning, with falls of 0.35% and 0.10% respectively.

The dollar index was a touch lower this morning at 95.06 and based on its daily technical configuration, further downside could emerge. An easier dollar should provide broad-based support for base and precious metals alike in the coming days. This has provided some relief for emerging currencies this morning, with the Turkish Lira strengthening to 6.4626.
The major currencies we follow are similarly firmer with the yuan at 6.8651, the Euro at 1.1614, Sterling at 1.3052 and the Australian dollar at 0.7126.

In data today, we have the average earnings index, claimant count change and the unemployment rate from the United Kingdom, as well as the German ZEW economic sentiment. US data of note today includes final wholesale inventories and Jolts job openings.

Despite growing signs of physical tightness across the base metals complex, a negative macroeconomic backdrop continues to trump fundamentals. The upside momentum remains capped, with buyers reluctant to establish their dominance due to the simmering trade tensions between the US and China. Concerns over a fresh set of US tariffs targeting $200 billion worth of Chinese goods, due to come into effect last week, and Chinese authorities’ vows to retaliate against any further tariffs continue to undermine market confidence. As such, global risk sentiment remains clouded by fear and uncertainty.

But so far, these conditions have failed to attract fresh demand for haven assets. Gold has rebounded well from its 2018 low at $1,160 per oz, but has not been able to sustain a move above $1,200 per oz. Meanwhile, silver prices are battling to stay above $14.00 per oz. Still, with gold and silver at these low price levels, investors may well turn to these metals as a relatively cheap haven asset should they need one.

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