METALS MORNING VIEW: Metals prices under pressure despite weaker dollar

Base metals traded on the London Metal Exchange are generally weaker this morning, Monday November 20, posting an average decline of 0.4%. Aluminium (-1%) and zinc (-0.7%) lead on the downside, while nickel is unchanged and the rest are off between 0.1% and 0.5%, with three-month copper prices off 0.5% at $6,763 per tonne.

Volume has been higher than average with 8,040 lots traded as of 07:42 am London time.

This comes after an upbeat performance on Friday when the complex closed up by an average of 1.1%, led by a 1.8% rise in nickel prices, while lead and zinc prices were up by 1.7%.

Precious metals are split with gold, silver and platinum prices lower by an average of 0.6%, with spot gold prices at $1,291.10 per oz, while palladium prices are up by 0.9% at $997.50 per oz. This follows a strong performance on Friday when the complex closed up by an average of 1.2%.

On the Shanghai Futures Exchange today, the base metals prices are mixed: aluminium prices are down by 2.1% and tin prices are off by 0.2%, while lead is the outperformer with 1.2% gain, zinc prices are up by 0.4%, nickel prices are firmer by 0.2% and copper prices are little changed at 52,950 yuan ($7,986) per tonne. Spot copper prices in Changjiang edged 0.2% higher to 52,780-53,020 yuan per tonne and the LME/Shanghai copper arb ratio stands at 7.83.

In other metals in China, iron ore prices are up by 2% to 481 yuan per tonne on the Dalian Commodity Exchange, steel rebar prices on the SHFE are up by 1.1%, while SHFE gold and silver prices are up by 0.7% and 0.5%, respectively.

In international markets, spot Brent crude oil prices are down by 0.41% at $62.45 per barrel. The yield on US ten-year treasuries is at 2.33% and the German ten-year bund yield is at 0.36%.

There are diverging trends in equities this morning with the Nikkei, Kospi and ASX 200 weaker by 0.6%, 0.3% and 0.2%, respectively, while the CSI 300 is up by 0.6% and the Hang Seng is up by 0.3%. This follows weakness in the Western markets on Friday where in the United States, the Dow Jones closed down by 0.43% at 23,358.24 and in Europe, where the Euro Stoxx 50 closed down by 0.23% at 3,539.26.

The dollar index is weaker at 93.73, concerns about US tax reform are weighing on the dollar but there seems to be some support around 93.40. The euro at 1.1779 is rebounding from earlier weakness, the weakness caused as German coalition talks stumble, while sterling is firmer at 1.3241. The yen is strong at 112.08, while the Australian dollar is weaker at 0.7566.

The Chinese yuan at 6.6290 has been trading sideways for a while now, while most of the other emerging currencies we follow are stronger on the back of the weaker dollar, especially the ringgit that is the strongest it has been for over a year.

On the economic calendar, the German producer price index (PPI) for October climbed 0.3%, which was unchanged from the previous reading. Later there is a German Bundesbank monthly report and data out on Chinese and US leading indicators. In addition, European Central Bank president Mario Draghi is speaking twice and UK Monetary Policy Committee member David Ramsden is also speaking.

Base metals prices have been drifting lower or trading sideways below recent high ground. Overall the fundamentals look bullish/supportive, but prices have already discounted a lot of the bullishness we think. No surprise in nickel’s price correction as it ran up during LME Week on the prospects for increased demand from electric vehicles but that running well ahead of any pick-up in demand. On balance we expect sideways and choppy trading as these high prices attract selling, while dips attract buying. The one metal that may have further upside fuel is aluminium as the market deals with the winter cutbacks in China, although again, a lot of this may be in the price.

Gold prices appear to have put in a base above $1,260 per oz and prices are on the rise again, the weaker dollar no doubt providing support. Platinum’s performance is looking even stronger than gold for a change, while silver is following gold’s performance. Palladium prices are strong, but there appears to be supply above $1,000 per oz.

Metal Bulletin publishes live futures reports throughout the day, covering major metals exchanges news and prices.