Gold and the other precious metals are unchanged to slightly weaker this morning with spot silver prices down 0.2% at $16.237 per oz, gold and platinum prices are off 0.1% at $1,241.13 and $924.30 per oz, respectively and palladium prices are little changed at $863.1 per oz. This was after a stronger performance on Tuesday when the complex closed up with gains between 0.8% and 1.1% - driven by a weaker dollar and falling bond yields.
Metals prices on the Shanghai Futures Exchange (SHFE) are also on divergent paths this morning, where lead prices are off 1.4%, zinc prices are down 1.1%, aluminium and copper prices are off 0.2% with the latter at 47,730 yuan ($7,062) per tonne, while nickel prices are up 0.1% and tin prices are up 1.4%. Spot copper prices in Changjiang are down 0.3% at 47,500-47,650 yuan per tonne and the LME/Shanghai copper arb ratio has eased to 7.96.
In other metals in China, September iron ore prices on the Dalian Commodity Exchange are up 3.9% at 533 yuan per tonne, this after a 5.5% gain on Tuesday. On the SHFE, steel rebar prices are up 1.1% and gold and silver prices are little changed.
In international markets, spot Brent crude oil prices are little changed at $48.67 per barrel and the yield on the US ten-year treasuries has eased to 2.27%, while the German ten-year bund yield is weaker at 0.55%. The retreat in hawkish central banks’ stances is leading to easier bond yields and that is undermining the dollar the most as the US Federal Reserve had been the main hawkish central bank.
Headline equities were largely weaker on Tuesday with the Euro Stoxx 50 closing down 1.1%, the Dow closed off 0.3% at 21,574.73, while the Nasdaq Composite closed up 0.5% and set a record high. Asia this morning is stronger across the board with the CSI 300 up 1.1%, the ASX 200 is up 0.8%, the Hang Seng is up 0.5%, while the Kospi and Nikkei are little changed – the latter due to the stronger yen.
The dollar index at 94.80 is weak, but it is holding above yesterday’s low of 94.48 – stalemate in Washington politics combined with weak US inflation data has reduced the chances of another US rate rise this year and that is weighing on treasury yields and the dollar. Conversely, other currencies are stronger with the euro at 1.1533, the yen at 112.17, the Australian dollar at 0.7928, although weak UK inflation data has reduced the bullish tone in sterling that is at 1.3037. The yuan remains strong at 6.7571, the real at 3.1528 is strengthening, as are the peso at 17.4600 and the rand at 12.9143, while the other emerging currencies are flat-to-firmer.
The economic agenda is focused on the USA with housing starts, building permits and crude oil inventories.
Better data out of China of late is driving the iron ore price rebound, along with the speculative wave behind it. But, as a barometer it suggests confidence in China’s economy is improving that should be good for the outlook for base metals too. Copper, aluminium, lead and zinc prices are not too far below former higher ground and that seems to be attracting forward selling and profit-taking. As such, this supply will need to be absorbed if the rebounds are to extend and for now prices do seem capped by this selling. We do, however, expect dips to be well supported and we remain quietly bullish as it now appears that there is more concerted growth around the world.
Gold prices are benefitting from the weaker dollar and lower bond yields will help reduce the opportunity cost of holding gold, but countering that, buoyant equities are a headwind for gold. In addition, the current lull in geopolitical tensions is not doing gold any favours. We are not expecting much from the precious metals camp in the short term, but we expect dips to remain supported.
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