While the metals have generally found good underlying support, overhead resistance does seem to be capping the upside, which is perhaps not surprising because we are in the middle of the summer lull.

  • US equities focused on strong results, less on the Delta variant’s rampage

Base metals
LME three-month base metals prices were mixed this morning; copper ($9,596 per tonne) and aluminium ($2,590.50 per tonne) were up by 0.4% and 0.1% respectively, while the rest were down by an average of 0.2%.

All of the most-active base metals contract on the SHFE were weaker this morning, with prices down by an average of 1%, with September copper down by 1.1% at 70,100 yuan ($10,838 per tonne).

Precious metals
Spot precious metals prices were up across the board, with prices rising by an average of 0.4%; gold was up 0.2% at $1,814.17 per oz.

Wider markets
The yield on US 10-year treasuries has held in low ground and was recently at 1.18%, unchanged from a similar time on Tuesday and down from 1.23% at a similar time on Monday.

Asia-Pacific equities were mainly stronger on Wednesday: the Nikkei (-0.21%), the Hang Seng (+1.14%), the ASX 200 (+0.38%), the CSI 300 (+0.76%) and the Kospi (+1.34%).

Currencies

The US Dollar Index turned lower last week and is consolidating around 92.01, just above where it was at a similar time on Tuesday (92.04).

The major currencies were mixed this morning: sterling (1.3932) and the Australian dollar (0.7404) were stronger, while the Japanese yen (109.10) and the euro (1.1871) were consolidating.

Key data
Economic data already out on Wednesday showed China’s Caixin services purchasing managers’ index (PMI) jump to 54.9 in July, from 50.3 in June.

Other key data out later includes the release of services PMI data out across Europe and the United States, Italian and EU retail sales, US ADP non-farm employment change and US crude oil prices.

In addition, US Federal Open Market Committee member Richard Clarida is scheduled to speak.

Wednesday’s key themes and views
Most of the base metals were consolidating this morning either within their upward trends, or while holding up in high ground, which suggests sentiment remains robust and the outlook remains positive. We see many crosswinds – lighter industrial buying pressure due to the summer lull and wariness about holding too much stock in case more lockdowns hit industrial activity. Conversely, concerns about the far-reaching spread of the Delta variant of Covid-19 further disrupting supply and supply lines encourages some to hold higher stocks. Plus, the underlying long-term themes of infrastructure spending and the accelerated push toward electrification remain bullish.

Gold prices lost upward momentum on July 30, with prices stuck in a sideways range now. For now, risk sentiment seems neutral – strong equities on the back of strong results are boosting risk-on, but the spread of the Delta variant is a cause for concern and the lower treasury yields suggest some investors are taking risk off the table. Gold seems well placed to pick up haven demand, especially with prices some $260 per oz below the record highs seen in August last year.