Metals consolidate recent gains but look stronger overall

After Tuesday’s gains the base metals price for the most part consolidated yesterday, October 26 although copper and tin prices did extend their gains slightly. All held up relatively well though, with three-month prices closing with average gains of 0.2 percent. Precious metals consolidated in lower ground yesterday, with spot prices down an average of one percent, led by a 2.2 percent fall in palladium prices to $618 per oz, silver prices were down 0.9 percent at $17.59 per oz, platinum prices were little changed, while gold prices closed off 0.6 percent at $1,265.80 per oz.

This morning the base metals have pulled back further with three-month prices down an average of 0.5 percent, zinc prices are off 0.1 percent, while the rest are off between 0.4 percent for aluminium and lead and 0.7 percent for tin. Copper prices were down 0.6 percent at $4,728 per tonne – volume on the LME has been below average with 3,451 lots traded as of 06:50 BST.

The precious metals are, however, firmer, with spot prices up an average of 0.3 percent this morning, ranged between a 0.1 percent rise in silver and 0.5 percent in platinum, gold prices were recently quoted at $1,268.20 per oz.

In Shanghai, base metals prices are down across the board by an average of 0.9 percent, led by a two percent drop in aluminium, which has been one of the strongest metals of late due to transport disruptions in China. Nickel and tin prices are down 0.9 percent, zinc prices are off 0.7 percent, while lead and copper prices are off 0.3 and 0.5 percent respectively, with December copper prices at Rmb 37,750 per tonne. Spot copper in Changjiang is off 0.4 percent to Rmb 37,990-38,110, the backwardation between spot and the December contracts is at an equivalent of $52 per tonne, while the LME/Shanghai copper arb ratio has slipped slightly to 7.99, but arbitrage opportunities should still exist for some types of trade, this should help support LME copper prices.

In other metals in China, January iron ore prices on the Dalian Commodity Exchange are little changed, imported iron ore prices were recently trading as high as $63 per tonne, January steel rebar prices on SHFE are off 1.9 percent and gold and silver prices are off an average of 0.5 percent. In international markets, spot Brent crude prices are up 0.4 percent at $50.13 per barrel.

European equities were slightly weaker yesterday with the Euro Stoxx 50 closed down 0.2 percent but the Dow was up 0.2 percent. In Asia this morning, the equities we routinely follow are weaker with losses of between 0.3 percent for the Nikkei and 1.2 percent for the ASX 200, the exception has been the Kospi that is up 0.6 percent.

In FX, the dollar index is consolidating in high ground, recently quoted at 98.63, the euro is edging higher, last at 1.0911, sterling and the aussie are flat at 1.2219 and 0.7633 and the yen is weaker at 104.60. In Emerging market (EM) currencies the yuan remains weak at 6.7754 and the others we routinely follow are on a back footing again – the persistent weakness in the yuan may well be worrying other EM currencies.

The economic calendar is busy today with Spanish unemployment, EU M3 money supply and private loans, UK GDP, index of services and realised sales, with US data including durable goods orders, initial jobless claims, pending home sales and natural gas storage – see table below.

Base metals prices have rebounded strongly this week but prices are now consolidating and are generally holding up well. The former overhead resistance levels are, however, not that far away so there may be more selling to be absorbed for a while. So far, only tin has pushed higher into new high ground for the year, but it is facing considerable stock shortages. We would expect more sideways to higher trading for most of the base metals – the market is now likely to focus on Chinese PMI data out on Tuesday and well as what developments are seen during next week’s London Metals Week.

Precious metals prices are still consolidating after the early October sell-off, prices have started to edge higher in recent days and considering the stronger dollar that is an achievement. There does not seem to be as much buying interest in the precious metals as there has been in the base metals. A stronger economic outlook may well mean less demand for safe-havens, but we would expect the more industrial precious metals to do relatively better than gold in this climate. 

 

Overnight Performance
BST 06:50 +/- +/- % Lots
Cu 4728 -29 -0.6% 1089
Al 1675 -7 -0.4% 1043
Ni 10165 -60 -0.6% 672
Zn 2342 -1.5 -0.1% 462
Pb 2058 -9 -0.4% 178
Sn 20295 -135 -0.7% 7
  Average   -0.5%         3,451
Gold 1268.19 2.39 0.2%  
Silver 17.596 0.011 0.1%  
Platinum 963.8 4.8 0.5%  
Palladium 620.5 2.5 0.4%  
  Average PM   0.3%  

 

SHFE Prices 06:51 BST RMB Change % Change
Cu 37750 -180 -0.5%
AL  13425 -275 -2.0%
Zn 18760 -125 -0.7%
Pb 16250 -55 -0.3%
Ni 80690 -740 -0.9%
Sn 132890 -1230 -0.9%
Average change (base metals) 0   -0.9%
Rebar 2497 -49 -1.9%
Au 277.8 -1.25 -0.4%
Ag 4049 -23 -0.6%

 

Economic Agenda
BST Country Data Actual Expected Previous
8:00am Spain
Unemployment Rate
  19.3% 20.0%
9:00am EU 
M3 Money Supply y/y
  5.1% 5.1%
9:00am EU 
Private Loans y/y
  1.9% 1.8%
9:30am UK
Prelim GDP q/q
  0.3% 0.7%
9:30am UK
Index of Services 3m/3m
  0.8% 0.6%
11:00am UK
CBI Realized Sales
  -2 -8
1:30pm US 
Core Durable Goods Orders m/m
  0.2% -0.2%
1:30pm US 
Initial jobless claims
  255k 260K
1:30pm US 
Durable Goods Orders m/m
  0.1% 0.1%
3:00pm US 
Pending Home Sales m/m
  1.2% -2.4%
3:30pm US 
Natural Gas Storage
  71B 77B