Concerns that the US relief package may be delayed and a warning from a Chinese central bank official of asset bubbles have dampened the mood.

  • Asian-Pacific equities were weaker this morning
  • The yield on US 10-year treasuries declined, suggesting risk-off

Base metals
Three-month base metals prices on the LME were mostly down this morning, with the exception of tin ($22,585 per tonne) that was up by 0.5%, while the rest were down by an average of 0.5% - led by a 0.8% fall in copper to $7,943 per tonne.

The most-traded base metals contracts on the SHFE were mixed with the March contracts of copper, aluminium and zinc down by an average of 0.5%, with copper off by 0.3% at 58,650 yuan ($9,050) per tonne, while March nickel and lead were up either side of 0.4% and March tin continued to ramp higher with a 2.7% gain.

Precious metals
Spot gold was down by 0.1% at $1,855.15 per oz this morning, silver ($25.29 per oz) was down by 0.1%, platinum was down by 1.1% at $1,083 per oz and palladium was up by 0.1% at $2,335 per oz.

Wider markets
The yield on US 10-year treasuries has dropped; it was recently quoted at 1.03%, compared with 1.10% a similar time on Monday.

Asian-Pacific equities were weaker this morning: the Kospi (-2.14%), the ASX 200 (closed), the CSI (-2.01%), the Nikkei (-0.96%) and the Hang Seng (-2.46%).

Currencies

The US Dollar Index started to edge higher on Monday and that has continued this morning with the index recently quoted at 90.46, this after 90.10 at a similar time on Monday.

The other major currencies were mixed this morning: the euro (1.2127) and the yen (103.74) were consolidating, while the Australian dollar (0.7688) and sterling (1.3640) were weaker.

Key data
Key data already out on Tuesday showed Bank of Japan’s core consumer price index fell by 0.1% year on year in December, unchanged from the 0.1% fall in November.

Later there is data on the United Kingdom’s employment situation and a reading of realized sales from the Confederation of British Industry, with US data on house prices, consumer confidence and Richmond manufacturing index also scheduled.

Today’s key themes and views
The metals are looking quite mixed. The standout is tin that is rallying sharply, with the cash/three-month spread in backwardation, while nickel prices are trending higher, lead and aluminium prices are working higher after their respective bouts of weakness in December and mid-January, zinc is looking heavy and vulnerable and copper is meandering sideways either side of $8,000 per tonne.

Although we remain long-term bullish toward the base metals, we have to be prepared for some countertrend moves along the way. If equities undergo a correction then that might well pull support from under the base metals for a while.

Gold prices remain in consolidation mode, capped by overhead resistance above $1,880 per oz, but with dips below $1,820 per oz attracting buying. Overall we think prices are mapping out a large-scale bull-flag that is forming following the 2018 to 2020 rally. The market has been consolidating for a long time, but at the end of the day, $1,800+ per oz is a high price for gold so the market is taking its time to adjust to this level.