denisovail1986: METALS MORNING VIEW 11/01: Metals looking stronger again

The precious metals are consolidating, with palladium prices drifting lower from recent record highs, while the rest are holding up in relatively high ground after what have been extensive rallies that followed the US Federal Open Market Committee (FOMC) meeting in December. Platinum prices are up by 0.4%, gold and silver prices are off by 0.1%, with the former at $1,317.92 per oz, while palladium prices are off by 0.2%.

This follows gains in gold, silver and platinum on Wednesday that averaged 0.6%, while palladium prices fell by 0.8%.

Gold, silver and platinum prices have had strong rallies in recent weeks and prices are now consolidating. A stronger dollar could lead to prices pulling back, but the rebounds since mid-December do suggest sentiment has turned more bullish again. With precious, base and oil prices performing well, it may be that commodities are back in vogue again with investors.

Base metals prices on the London Metal Exchange are generally higher this morning, Thursday January 11, with aluminium leading the way with a 0.8% gain to $2,203 per tonne, while tin is the one bucking the trend with a 0.3% decline. Nickel prices are unchanged, while the rest are up by between 0.2% and 0.4%, with copper prices up by 0.3% at $7,169 per tonne.

Volume has been average, with 6,933 lots traded as of 07.03 am London time.

This follows a bullish day on Wednesday, where all the metals closed in positive territory with gains averaging 0.8%.

On the Shanghai Futures Exchange today, base metals prices were for the most part firmer, led by a 1.1% rise in aluminium prices, while lead prices dipped by 0.5%, and the rest were up by between 0.2% for tin and 0.9% in nickel, with copper prices up by 0.5% at 55,170 yuan ($8,467) per tonne. Spot copper prices in Changjiang are up by 0.2% at 54,620-54,770 yuan per tonne and the LME/Shanghai copper arbitrage ratio has climbed to 7.70, up from 7.69 on Tuesday.

In other metals in China, iron ore prices are down by 0.4% at 556 yuan per tonne on the Dalian Commodity Exchange. On the SHFE, steel rebar prices are up by 0.2%, gold prices are stronger by 0.3% and silver prices are up by 0.2%.

In wider markets, spot Brent crude oil prices are strong at $69.02 per barrel, the yield on US 10-year treasuries is on the move, it is up at 2.54%, and the German 10-year bund yield is firmer at 0.46%.

Equities in Asia are broadly weaker today: ASX 200 (-0.48%), Kospi (-0.47%), Nikkei (-0.33%), CSI 300 (-0.07%), while the Hang Seng is little changed (+0.02%). This follows weakness in western markets on Wednesday, where in the United States the Dow Jones closed little changed, off by 0.07% at 25,369.13 and in Europe where the Euro Stoxx 50 closed down by 0.36% at 3,609.83.

The dollar index is consolidating off its recent lows and was recently quoted at 92.52. The euro at 1.1933 is looking a bit top-heavy, as is sterling (1.3479), while the yen (111.85) is consolidating recent gains and the Australian dollar (0.7863) is looking stronger. The yuan at 6.5075 is giving back some of its recent strength, it having been at 6.4739 on Monday, while the other emerging currencies are consolidating after recent gains.

Data out already today shows a pick-up in Japanese leading indicators to 108.6%, from a previous reading of 106.5%. Later there is data out on Italian retail sales, UK credit conditions, EU industrial production, European Central Bank monetary policy meeting accounts, with US data including producer prices, initial jobless claims, economic optimism, natural gas storage and the federal budget balance. In addition, FOMC member William Dudley is speaking.

Base metals prices are starting to work higher after generally drifting since the start of the year, but overhead tails on daily candlesticks in recent days does suggest there is overhead selling around too. Nickel and tin have been the two metals that have held up the best this week, with nickel setting a fresh two-and-a-half-year high at $13,200 per tonne. Perhaps continued focus on cobalt scarcity and a pressing need to use more nickel and less cobalt in lithium-ion batteries, combined with a relatively low nickel price (compared with prices seen between 2006 and 2015) is seeing some long-term strategic/investment buying. We remain quietly bullish for the base metals complex and see the longer-term outlook as being positive, and traders may well continue to front run that. We expect dips to remain well supported – as seems to have been the case in recent days.

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