Broad base metals rally under way into year-end

Base metals prices trading on the London Metal Exchange are generally consolidating on the morning of Friday December 22, with tin, copper, aluminium and nickel prices weaker by between 0.1% and 0.6%, three-month copper prices at $7,069 per tonne and lead and zinc prices up 0.2%.

Trading volumes have been high, with 9,225 lots traded as of 07.58 am London time. This comes after a generally strong performance on Thursday that saw average gains of 0.4%. Lead, once again, was  the only metal closing down on the day, dropping 0.8% to $2,504.50 per tonne, while the rest were up an average of 0.6%.

Precious metals are firmer this morning, with gold prices up by 0.1% at $1,267.77 per oz. Silver, platinum and palladium are up by 0.3%, 0.4% and 0.5% respectively. This follows a mixed performance on Thursday where gold prices were little changed. Silver and platinum prices were down by 0.3% and 0.4%, respectively, and palladium prices were up by 0.9% at $1,036 per oz.

On the Shanghai Futures Exchange today, base metals prices are mixed with aluminium and tin prices off by 0.4%, nickel prices unchanged, while copper and lead prices are up by 0.4%, with copper at 54,500 yuan ($8,287) per tonne and zinc prices are up by 0.2%. Spot copper prices in Changjiang are up by 0.1% at 53,800-54,050 yuan per tonne and the LME/Shanghai copper arb ratio is weaker at 7.71.

In other metals in China, iron ore prices are up by 1.5% at 543 yuan per tonne on the Dalian Commodity Exchange. On the SHFE, steel rebar prices are up by 2.6%, while gold prices are up by 0.12% and silver prices are off by 0.2%.

In international markets, spot Brent crude oil prices are up by 0.18% at $64.74 per barrel, the yield on US 10-year treasuries remains strong at 2.49%, as is the German 10-year bund yield at 0.41%.

Equities in Asia today are mixed, with the CSI 300 down by 0.33%, while the rest are firmer: Hang Seng (0.53%), Kospi (0.44%), Nikkei (0.16%) and ASX 200 (0.15%).

This followed a stronger performance in western markets on Thursday, where in the United States the Dow Jones closed up by 0.23% at 24,782.29 and in Europe the Euro Stoxx 50 closed up by 0.51% at 3,570.78.

The dollar index at 93.39 this morning is little changed with prices consolidating in mid-ground. We wait to see how the market interprets the US tax bill, which is potentially a negative for the dollar as it initially increases the budget deficit before the benefits are felt. But countering that, the US may be seen a stronger place politically now president Donald Trump has won his first major policy victory. The euro at 1.1852 is also consolidating but on a front-footing, the Australian dollar is stronger at 0.7714, while the yen at 113.39 is weaker and sterling at 1.3364 is consolidating.

The yuan at 6.5715 is consolidating recent strength, having reached 6.5536 yesterday. In the other emerging currencies we follow the rand is consolidating recent gains and the peso is weaker, the latter probably as Trump’s policy success on the Tax bill may energize him to pursue other ‘promised’ policies.

Economic data already out shows a slight pick-up in German GfK consumer climate to 10.8, from 10.7 previously, German import prices climb by 0.8% from 0.6%, while French consumer spending climbed by 2.2% after a 2.1% decline previously. Data out from the UK includes: the current account, GDP, index of services, revised business investment, with US data including: durable goods orders, PCE prices, personal income and spending, new home sales and revised University of Michigan consumer sentiment and inflation expectations.

The rallies in the base metals prices continue with underlying tails on candlesticks suggesting dip buying interest. Lead prices have been the ones struggling the most, but some buying seems to be emerging now. It looks as though the rallies are being driven by fresh buying, which suggests that the underlying bullish fundamentals are re-exerting themselves.

We remain quietly bullish and continue to expect range-trading in high ground; it looks as though the base metals could put in a strong finish to 2017 .

The precious metals’ rebounds are looking robust and with the base metals looking strong too, it looks as though there is across-the-board interest in getting into metals. This despite low geopolitical tensions and rising bond yields, which could be a headwind for gold.