Gold prices continue to consolidate in mid-ground

Precious dropped across the board with losses averaging 1.2 percent, with gold prices at $1,319.75. The base metals remained mixed yesterday with nickel and zinc remaining heavy with losses of 1.9 and 1.4 percent respectively, aluminium was off 0.3 percent, while copper ($4662.50) and tin were up 0.1 percent and lead was up 0.4 percent.

This morning, the base metals are little changed, copper and zinc are up the most with 0.3 percent gains, nickel is up 0.2 percent, while the rest are little changed. Volume is light with 3,611 lots traded as of 06:00 BST. Precious metals are consolidating, gold prices are up 0.1 percent, as is platinum, silver is up 0.4 percent, while palladium has rebounded 1.3 percent.

In Shanghai, the metals have also been mixed with copper up 0.7 percent at Rmb 36,720, lead is up 0.4 percent, while the rest are down between 0.7 and 0.9 percent. Spot copper in Changjiang is up 0.5 percent at Rmb 36,730-36,930, the backwardation with the spread is at an equivalent of some $31 per tonne, while the LME/Shanghai copper arb ratio has eased to 7.85. SHFE will be closed from Thursday for the Mid-Autumn Festival, it reopens on Monday.

In other metals in China, iron ore prices are flat at Rmb 395 per tonne for the January contract, with international prices around $56.20, steel rebar is off 0.4 percent, while gold prices are down 0.6 percent and silver is 0.8 percent lower. Brent crude oil is last at $47.23.

Equities – were weaker again on Tuesday with the Euro Stoxx 50 off 1.3 percent, the Dow after rebounding on Monday, fell again yesterday to close down 1.2 percent. In Asia this morning, the markets are mixed – the Nikkei is down 0.4 percent, the CSI 300 is off 0.5 percent, while the Hang Seng, the ASX 200 and the Kospi are up between 0.2 and 0.4 percent.

In FX, the dollar index is firmer at 95.54, the euro is mid-range at 1.1227, sterling is weaker at 1.3200, as are the yen at 102.90 and the aussie at 0.7483. The yuan is off its low, last at 6.6705, but most of the other emerging market economies we follow are looking weaker – as barometers go, that suggests markets are more nervous than they have been of late.

Economic data out today includes Japanese revised industrial production, which fell 0.4 percent, having been flat before. Later we get French CPI, UK employment data, EU industrial production, US import prices and US crude oil inventories.

Aluminium has led the decline in recent weeks, zinc has started to follow, while lead, nickel and tin seem to be consolidating, but copper appears to have found support with prices edging higher. Given the strength of most of the metals, bar copper, in recent months that saw metals set fresh highs for the year, it is not surprising that some profit-taking is emerging. Conversely, the fact copper did not set fresh highs may mean there is less profit-taking to be done and having pulled back, bargain hunting is emerging. With better than expected Chinese data appearing, we do see the weakness in the metals as consolidation, and would expect dips to be well supported and to be followed by further strength. The caveat in our mildly bullish stance is that there is no major shift in central bank policy.

For the precious metals, we also see consolidation after the strong gains in June-July, but gold prices are holding up well and we expect that to remain the case – the others are likely to follow gold’s lead.

 

Overnight Performance
BST	05:59	+/-	+/- %	Lots
Cu	4675	12.5	0.3%	1526
Al	1563	-2	-0.1%	450
Ni	9920	20	0.2%	501
Zn	2238.5	7	0.3%	1055
Pb	1892	1	0.1%	66
Sn	19020	10	0.1%	13
	Average		0.1%	3,611
Gold	1320.52	0.77	0.1%
Silver	18.947	0.067	0.4%
Platinum	1034.4	1.4	0.1%
Palladium	659.3	8.3	1.3%
	Average PM		0.5%

 

SHFE Prices 06:02 BST	RMB	Change	% Change
Cu	36720	240	0.7%
AL	11925	-100	-0.8%
Zn	17650	-120	-0.7%
Pb	14055	55	0.4%
Ni	78450	-750	-0.9%
Sn	122070	-880	-0.7%
Average change (base metals)	0		-0.4%
Rebar	2262	-10	-0.4%
Au	285.3	-1.6	-0.6%
Ag	4230	-35	-0.8%

 

Economic Agenda
BST	Country	Data	Actual	Expected	Previous
5:33am	JPY	Revised Industrial Production m/m	-0.4%	0.0%	0.0%
7:45am	EUR	French Final CPI m/m		0.3%	0.3%
9:30am	GBP	Average Earnings Index 3m/y		2.1%	2.4%
9:30am	GBP	Claimant Count Change		1.7K	-8.6K
9:30am	GBP	Unemployment Rate		4.9%	4.9%
10:00am	EUR	Industrial Production m/m		-0.8%	0.6%
Tentative	EUR	German 30-y Bond Auction			0.45|1.5
1:30pm	USD	Import Prices m/m		-0.1%	0.1%
3:30pm	USD	Crude Oil Inventories		2.8M	-14.5M

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