Base metals are for the most part firmer this morning January 27, with LME prices up an average of 0.3% led by a 1% gain in nickel prices to $9,440 per tonne. Copper is the metal bucking the trend with a 0.2% decline in prices to $5,837 per tonne.
Volumes have been noticeably light due to the start of the Chinese Lunar New Year holiday, with just 1,253 lots traded, compared with an average at around this time of day last week of 8,060 lots.
The firmer tone follows yesterday’s weakness when the base metals prices closed down an average of 2.2% on a day that saw nickel price slump 4% and lead prices off 3.2%.
Precious metals prices are down around 0.5% this morning, with spot gold prices at $1,182.10 per oz, which follows losses averaging 1.2% yesterday when palladium prices fell 1.8% to $722 per oz and gold prices closed 1% lower at $1,188.25 per oz. Strong equity markets and no major shocks yet from the new US administration seem to be weighing on precious metals prices.
In international markets, the spot Brent crude oil price is little changed at 56.14 per barrel.
Equities were mixed yesterday, with the Euro Stoxx 50 closing down 0.2% but the Dow ending up 0.2% at 20,100. This morning most of Asia is closed for the start of the Chinese Lunar New Year holidays. The Nikkei is up 0.3% and the ASX 200 is up 0.8%.
In FX, the dollar turned higher yesterday and it is further gaining ground this morning with the dollar index recently quoted at 100.74, after a recent low of 99.79. The dollar’s strength has brought downward pressure on other currencies, with the euro weaker at 1.0667, the yen at 115.10, the aussie at 0.7527 and sterling at 1.2547. Emerging market currencies are also weaker.
The economic agenda is fairly busy, Japan’s core CPI climbed 0.1% in December, slightly weaker than the 0.2% seen in November. There is money supply and private loans data out of the EU, plus there is an EcoFin meeting today, while US data includes advanced GDP and GDP prices, durable goods orders and revised University of Michigan consumer sentiment and inflation expectations – see table below.
The weaker tone in the base metals yesterday is of little surprise as there was likely to be some adjustment ahead of the Chinese Lunar New Year holiday, especially given the general show of strength in recent days/weeks. That said, nickel prices have been showing weakness since December 19, so it is trading its own fundamentals that have been weakened by developments in Indonesia over the allowing of nickel ore exports. Tin prices have also been weaker, again due to a belief that politicians have changed Chinese export rules on refined tin, although this has yet to be confirmed. Tin stocks have also been rising. The rest of the metals now seem to be consolidating recent gains and a stronger dollar and thinner trading volumes due to the Chinese New Year holiday may well lead to some choppier trading.
Precious metals prices are in retreat, stronger equity prices and a lack, so far, of geopolitical stress are weighing on prices, as is the stronger dollar. However, there is still room for a pick-up in geopolitical tension and the standoff between the Trump administration and Mexico may be the start of that. We should get a feel for how bullish underlying sentiment is for gold, by seeing how far prices fall before they find solid support. We expect dips to be well supported.
|All Day||China||Bank Holiday|
|5:00am||Japan||BOJ Core CPI y/y||0.1%||0.1%||0.2%|
|9:00am||EU||M3 Money Supply y/y||4.9%||4.8%|
|9:00am||EU||Private Loans y/y||2.0%||1.9%|
|All Day||EU||ECOFIN Meetings|
|1:30pm||US||Advance GDP q/q||2.1%||3.5%|
|1:30pm||US||Core Durable Goods Orders m/m||0.5%||0.6%|
|1:30pm||US||Advance GDP Price Index q/q||2.1%||1.4%|
|1:30pm||US||Durable Goods Orders m/m||2.7%||-4.5%|
|3:00pm||US||Revised UoM Consumer Sentiment||98.2||98.1|
|3:00pm||US||Revised UoM Inflation Expectations||2.6%|
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