• Concerns that an additional stimulus package in the United States may struggle to get agreed before the presidential election has weighed on sentiment.
  • Forecasts from the International Lead and Zinc Study Group for some large supply surpluses in lead and zinc this year and next may well weigh on sentiment, but have had limited impact so far.

Base metals
Three-month base metals prices on the LME were weaker this morning, with prices down by an average of 0.5% as at 6.15am London time. Nickel led the retreat with a 1% fall to $15,745 per tonne, it was also the only metal to close down on the day on Wednesday – albeit earlier on Wednesday it has set fresh monthly highs at $16,135 per tonne.

Copper, aluminium and tin were all down by 0.5% with copper at $6,962.50 per tonne, while lead and zinc were down by just 0.1% – so do not seem to be overly concerned by the forecasts mentioned above – at least not yet.

The most-traded base metals contracts on the Shanghai Futures Exchange were mixed, but on average the metals were down by 0.3%. December nickel led on the downside with a 1.7% fall, December tin was down by 0.6% and November lead was down by 0.2%. November aluminium was little changed, with November zinc up by 0.4% and November copper up by 0.3% at 52,260 yuan ($7,850) per tonne.

Precious metals
The precious metals complex was mixed on Thursday, with gold ($1,914.87 per oz) and silver ($24.89 per oz) bullion both off by 0.5%, while spot platinum ($891 per oz) and spot palladium ($2,413.20 per oz) were up by 0.2% and 0.3% respectively.

Wider markets
The yield on US 10-year treasuries has eased and was recently quoted at 0.81%, compared with 0.82% at a similar time on Wednesday.

Asia-Pacific equities were weaker, with the ASX 200 (-0.29%), the Hang Seng (-0.01%), the Nikkei (-0.67%), the CSI 300 (-0.68%) and the Kospi (-0.85%).

The US dollar index has been weakening this week and was recently quoted at 92.69, after 92.88 at a similar time on Wednesday.

With the dollar weaker, the other major currencies were mixed with the euro (1.1854) and the Australian dollar (0.7105) consolidating, while sterling (1.3147) and the yen (104.63) have strengthened noticeably.

Key data
Economic data already out on Thursday showed Germany’s GfK consumer climate reading fall to -3.1, from -1.7 previously.

Later there is data on industrial order expectations from the Confederation of British Industry, EU consumer confidence and US data on initial jobless claims, leading indicators, existing home sales and natural gas storage.

In addition, UK Monetary Policy Committee member Andy Haldane and Bank of England governor Andrew Bailey are scheduled to speak.

Today’s key themes and views
The base metals prices on the LME, with the exception of lead, are looking particularly strong, so today’s weakness looks like a pause. But because we are probably entering a volatile period ahead of the US presidential election, there may be risk reduction. Overall, we expect more choppy trading, but expect dips will be well supported.

The bearish zinc forecast from the ILZSG is a concern because it suggests the bullishness in zinc may be misplaced – this is something we will be looking into in our research products.

Gold prices are edging higher and are approaching resistance. Overall, many of the bullish arguments for gold that existed during the March-August rally, especially all the uncertainty that lies ahead and the legacy of all the monetary and fiscal stimulus, still exist, although strength in other asset classes and the rise in treasury yields have raised the opportunity cost of holding gold. These cross winds are keeping gold rangebound – over the long run we remain bullish, but expect increased volatility around the US election.