• Major western equity index futures rebounding after Monday’s weakness
  • Expect increased volatility in the run-up to the US presidential election

Base metals

Three-month base metals prices on the LME were stronger across the board this morning, with gains averaging 0.6%. Zinc the laggard with a 0.2% gain to $2,548.50 per tonne, while the rest were closely bunched with gains ranged between 0.5% and 0.7%, with copper up by 0.5% at $6,810.50 per tonne.

The most-traded base metals contracts on the Shanghai Futures Exchange were split 50-50 with December nickel, zinc and lead up by 0.3%, 0.3% and 1%, respectively, while December tin and November tin are little changed and December copper was down by 0.5% at 51,650 yuan ($7,705) per tonne.

Precious metals
The precious metals complex was firmer on Tuesday with gains averaging 0.8%, led by a 1.2% rise in silver ($24.55 per oz); gold ($1,908.70 per oz) was up by 0.3% while spot platinum ($881 per oz) and spot palladium ($2,384.50 per oz) were up by 1% and 0.8% respectively.

Wider markets
The yield on US 10-year treasuries has eased and was recently quoted at 0.8%, compared with 0.81% at a similar time on Monday.

Asia-Pacific equities were mainly weaker, with the ASX 200 (-1.70%), the Hang Seng (-0.52%), the Nikkei (-0.04%), the Kospi (-0.56%) all down, but the CSI 300 (+0.18%) bucked the trend.

Currencies
The US dollar index was on an uptick within the month-old downward trend this morning, it was recently quoted at 92.98, after 92.90 at a similar time on Monday.

The other major currencies were consolidating: the euro (1.1820), the Australian dollar (0.7130), sterling (1.3022) and the yen (104.78).

Key data

Economic data already out on Tuesday showed the Bank of Japan’s consumer price index for September fell to -0.1%, having been flat previously.

Later there is data on Spanish unemployment, EU M3 money supply and private loans and data on realized sales from the United Kingdom’s Confederation of British Industry.

US data includes durable goods orders, two house price indices, consumer confidence and the Richmond manufacturing index.

Today’s key themes and views
With the US presidential election just a week away and some jitters seen in western equity markets on Monday, we expect more volatility in the metals while traders position themselves ahead of the election. The metals started to pullback last week, but dip-buying emerged into Monday’s price weakness with follow-through buying seen this morning. So the underlying bullish theme tied into limitless liquidity and the promise of infrastructure spending is still present and we expect it will dominate over the months ahead. But in the short term, volatility could pick up.

Gold prices are stuck in a sideways range; over the long run we remain bullish, but are prepared for increased volatility around the US election.