Gold prices continued their downtrend on Wednesday with prices falling 0.6% to $1,208.35 per oz, silver prices fell at a faster pace, they dropped 1.5%, with platinum prices falling 1.3% and palladium off 0.3%. The precious metals prices fell an average of 0.9% on Wednesday and gold prices have been falling for nine days now – palladium is the precious metal that is holding up the best.
In Shanghai this morning, the base metals are down across the board with average losses of 1.8%, although that is somewhat skewed by a 5.1% drop in nickel prices. Tin prices are down the least with a 0.7% fall, while the rest are down between 1- 1.5%, with copper prices off 1.2% at 46,660 yuan per tonne. Spot copper in Changjiang is off 1% at 46,480-46680 yuan per tonne and the LME/Shanghai copper arb ratio at 8.19 continues to expand.
In other metals in China, May iron ore prices on the Dalian Commodity Exchange are down 1.8% and on the Shanghai Futures Exchange, steel rebar is off 2.1%, gold prices are down 0.7% and silver prices are off 1.4%. In international markets, spot Brent crude oil prices are up 0.7% at $53.51 per barrel, so some bargain hunting seems to be emerging, this despite a rise in crude oil inventories. Yields on US 10-year treasuries are at 2.57%, so continue to rise in line with Fed fund futures that now point to an 88.6% chance of a 25 basis point rise in interest rates at next week’s US Federal Open Market Committee (FOMC) meeting.
Equities on Wednesday saw the Euro Stoxx 50 close up 0.1%, while the Dow closed down 0.3%. This morning in Asia, the Nikkei is up 0.3%, the Hang Seng is off 1.3%, the CSI 300 is down 0.7%, the ASX 200 is off 0.3% and the Kospi is off 0.2%. The markets seem to be bracing for the likely US interest rate rise.
In FX, the dollar index is stronger at 102.14, Wednesday’s strong ADP non-farm employment change, increasing the chance of a rate rise even further. Conversely, the major currencies are weaker this morning with the euro at 1.0540, the sterling at 1.2160, the yen at 114.40 and the Australian dollar at 0.7522. The yuan’s slide has halted today, it was recently quoted at 6.9034, the stronger PPI data may be helping that. Most of the emerging market currencies we follow are flat-to-slightly weaker.
Key economic data out already shows Chinese CPI at 0.8%, down from 2.5%, but the weaker figure has been blamed on the Chinese Lunar New Year holiday, while PPI climbed 7.8% after 6.9% in January. Chinese passenger vehicle sales fell 2.9% in the first two month of 2017, according to the China Passenger Car Assn. Japan’s machine tool orders climbed 9.1% and French non-farm payrolls were up 0.4%. There is an EU Ecofin meeting today and the ECB will announce its latest monetary policy. US data includes the Challenger job cuts, initial jobless claims, import prices and natural gas storage – see table below for more details.
The correction in the base metals continues, risk off seems to be underway ahead of next week’s FOMC meeting but large stock moves in copper and nickel and further uncertainty over Philippine and Indonesian mining and export policies are adding to the risk-off move, while recent lack of upside progress also seems to be prompting stale long liquidation. Key now will be how much buying steps off the sidelines to take advantage of the weaker prices, which coming just ahead of the seasonally stronger second quarter may be a welcome opportunity for consumers. On balance we remain bullish for the medium term and expect the dips not to last too long.
The correction in the precious metals seems to be driven by the increasing chance of a US interest rate rise next week, which a few weeks ago was a 50:50 risk, but is now much higher. Looking beyond next week’s FOMC meeting, we expect demand for gold to pick up again as investors put more money into havens.
Metal Bulletin publishes live futures reports throughout the day, covering major metals exchanges news and prices.
|Average change (base metals)||-1.8%|
|12:00am||Japan||Average Cash Earnings y/y||0.5%||0.3%||0.5%|
|12:01am||UK||RICS House Price Balance||24.0%||23.0%||24.0%|
|5:59am||Japan||Prelim Machine Tool Orders y/y||9.1%||3.5%|
|6:30am||France||French Final Non-Farm Payrolls q/q||0.4%||0.4%||0.4%|
|Day 1||EU||ECOFIN Meetings|
|12:30pm||US||Challenger Job Cuts y/y||-38.8%|
|12:45pm||EU||Minimum Bid Rate||0.0%||0.0%|
|1:30pm||EU||ECB Press Conference|
|1:30pm||US||Initial jobless claims||239K||223K|
|1:30pm||US||Import Prices m/m||0.1%||0.4%|
|3:30pm||US||Natural Gas Storage||-59B||7B|