Gold prices find some support, but market remains vulnerable

Precious metals struggled last week and most ended lower on Friday, although palladium bucked the trend with a 2.3 percent rise, while sister metal platinum closed down 1.5 percent, silver was dropped one percent and gold prices were off 0.4 percent to $1,310. Gold set a low earlier in the day at $1,306.35, the previous dip low was $1,302.55 on 1^st September.

Base metals tried higher on Friday and at the day’s highs prices were up an average of 0.6 percent, led by a one percent rise in aluminium, but they generally slid into the close to close down an average of 0.1 percent, skewed by a 0.5 percent rise in tin, while aluminium and nickel closed up 0.1 percent, lead and zinc closed down around 0.6 percent and copper closed off 0.1 percent at $4,777. Trading has been thin with China being closed on Thursday and Friday, but copper kept most of its Wednesday’s gains so China has reopened to a stronger LME copper price. On Wednesday SHFE copper prices closed at Rmb 36,720, they opened up this morning at Rmb 37,100, up one percent.

This morning, the base metals are up an average of 0.4 percent, copper is the main one bucking the trend with a 0.6 percent fall to $4,750, aluminium is off 0.1 percent, while the rest are firmer, led by a 1.9 percent rise in nickel to $9,910. Tin is up 0.5 percent, zinc is up 0.3 percent, lead is little changed. Volume has picked up smartly, with 8,660 lots traded as of 06:24 BST.

Precious metals are up across the board by an average of 1.2 percent, then by a 1.9 percent gain in silver to $19.12, gold prices are up 0.4 percent, while the PGMs are up around 1.2 percent.

In Shanghai, the base metals are mixed, copper is up 1.4 percent at Rmb 37,160, lead is up 1.4 percent, tin is up 1.3 percent, nickel is up 0.8 percent, while aluminium and zinc are off around 0.4 percent. Spot copper in Changjiang is up one percent at Rmb 37,100-37,300, the backwardation with the November contract is at an equivalent of $20 per tonne, while the LME/Shanghai copper arb ratio is around 7.82.

In other metals in China, iron ore is off 0.3 percent, steel rebar is down one percent, while silver is up 1.1 percent and gold prices are off 0.6 percent. In international markets, Brent crude oil is up one percent at $46.44.

Equities were weaker on Friday with the Euro Stoxx 50 closing down 1.3 percent and the Dow finished off 0.5 percent, but Asia has been bullish with the Hang Seng up one percent, the CSI 300 is up 0.7 percent, the Kospi is up 0.8 percent, while the ASX 200 is off slightly, the Nikkei is closed.

In FX, the US dollar rebounded on Friday following slightly firmer CPI data that showed a rise of 0.2 percent, it is last at 95.84. The euro is weaker at 1.1170, as is sterling at 1.3048, the yen is flat at 102.00 and the aussie is firmer at 0.7543. The yuan is firmer at 6.6689 as are most of the emerging market currencies we follow, which suggests a degree of risk-on.

The economic agenda is fairly light today with UK house prices index climbing 0.7 percent, later we get data on the EU current account, Germany’s Bundesbank monthly report and US NAHB housing market index – see table below for more details. The market is now likely to focus on the Bank of Japan’s and US FOMC’s decisions and statements on Wednesday.

Copper led the rebound last week and prices are consolidating but seem to be holding on to most of the gains, although some selling appears to be around this morning, probably as China takes advantage of the gains. Lead has followed copper’s lead, while zinc is struggling to consolidate after last week’s weakness, nickel is trying to rebound, as is tin. On balance, we would not be surprised to see buying take advantage of the weaker prices and provide support. The funds trading Comex copper returned as net buyers after three weeks of net selling.

Precious metals have been under pressure of late but they did find some buying this morning that suggests scale down buying remains strong. The lower prices in the PGMs have also found buying. Wednesday’s central bank statements and decisions are likely to provide the next direction for gold prices, so the markets are likely to remain nervous until then. We remain bullish over the medium term, but with prices testing support they remain vulnerable in the short-term.

 

Overnight Performance
BST	06:24	+/-	+/- %	Lots
Cu	4750	-27	-0.6%	3425
Al	1574.5	-1.5	-0.1%	754
Ni	9910	185	1.9%	2348
Zn	2224	7	0.3%	1751
Pb	1935	0.5	0.0%	369
Sn	19205	105	0.5%	13
	Average		0.4%	8,660
Gold	1314.96	4.96	0.4%
Silver	19.119	0.354	1.9%
Platinum	1026.6	11.6	1.1%
Palladium	678.7	8.7	1.3%
	Average PM		1.2%

 

SHFE Prices 06:25 BST	RMB	Change	% Change
Cu	37160	520	1.4%
AL	11895	-30	-0.3%
Zn	17555	-65	-0.4%
Pb	14250	190	1.4%
Ni	79130	590	0.8%
Sn	124060	1580	1.3%
Average change (base metals)	0		0.7%
Rebar	2237	-23	-1.0%
Au	284.35	-1.6	-0.6%
Ag	4294	48	1.1%

 

Economic Agenda
BST	Country	Data	Actual	Expected	Previous
12:01am	UK	Rightmove HPI m/m	0.7%		-1.2%
All Day	Japan	Bank Holiday
9:00am	EU	Current Account		27.2B	28.2B
Tentative	Germany	German Buba Monthly Report
3:00pm	US	NAHB Housing Market Index		60	60

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