• Optimism pushes current economic and health problems to the background
  • UK Chancellor warns of biggest contraction in 300 years

Base metals
The London Metal Exchange three-month copper price was moving from strength to strength this morning with prices setting a fresh high at $7,407 per tonne, the highest since January 2014 - quite remarkable when headlines are talking of the biggest contraction in the UK economy in 300 years and economic data is starting to show slowdowns while the Covid-19 pandemic spreads out of control.

The other base metals were firm with gains averaging 0.4% and with prices holding up in high ground.

The most-traded base metals contracts on the Shanghai Futures Exchange were mixed, with February nickel down by 1.3% and January lead off by 0.1%, while the others were up by an average of 0.5% - led by a 0.9% rise in January copper to 55,240 yuan ($8,393) per tonne.

Precious metals

Spot gold prices have got some support off the lows, they were up by 0.1% this morning at $1,809.94 per oz – this after a low of $1,801 per oz on Tuesday. Silver was off by 0.2% at $23.30 per oz, palladium was up by 1.9% at $2,378.50 per oz and platinum was up by 0.4% at $969.50 per oz.

Wider markets

The yield on US 10-year treasuries has stabilized, it was recently quoted at 0.88%, unchanged from a similar time on Wednesday.

Asia-Pacific equities were mixed this morning: the ASX 200 (-0.7%), the CSI (-0.14%), the Nikkei (+0.91%), the Hang Seng (+0.25%), and the Kospi (+0.94%).

Currencies

The US dollar index continues to head lower and was recently at 91.88 – support is seen at 91.73.

The other major currencies were firmer, in high ground, but below recent highs: the euro (1.1936), the Australian dollar (0.7364), sterling (1.3392) and the yen (104.33).

Key data
With today being Thanksgiving in the United States, the economic agenda is light, with data on German GfK consumer climate, EU M3 money supply and EU private loans.

In addition, the European Central Bank will release its monetary policy meeting accounts.

Today’s key themes and views

With LME copper setting fresh highs for the year again this morning and with many equity indices at or near record highs, sentiment remains extremely bullish. While momentum is so strong there is little point standing in its way. A positive outlook and an extremely liquid climate could see rallies extend well beyond where value lies. Needless to say we think prices have run ahead of the fundamentals and are vulnerable to a correction.

Given the euphoria in macro picture we are not surprised gold is under pressure – we expect it to correct further – interestingly cryptocurrencies were also under pressure this morning with bitcoin down around 5% and ether down by 8%. Whether this supports gold, or weakens it, remains to be seen.