Metals prices looking brighter, weaker dollar helping

FastMarkets

Base metals prices on the London Metal Exchange are up across the board this morning, Thursday June 29, with gains averaging 0.4%. Copper prices lead the advance with a 0.7% gain to $5,918 per tonne – the highest prices have been since April 5.

Volume has also been high with 9,404 lots traded as of 06:13 BST – firmer prices and a pick-up in volume bode well, especially when the stronger tone has carried on from Wednesday when prices closed up an average of 0.4%.

Precious metals are also up across the board this morning with gains averaging 0.4% with gold prices up 0.1% at $1,251.54 per oz, silver prices are up 0.3% and the PGMs up around 0.6%. Again this follows a generally firmer day on Wednesday when prices closed up an average of 0.2%.

The base metals on the Shanghai Futures Exchange (SHFE) are also all higher this morning, up by an average of 0.7%. Copper prices lead the way with a 1% gain to 47,300 yuan per tonne ($6,975 per tonne), aluminium prices are up 0.3%, while the rest are up around 0.7%. Spot copper prices in Changjiang are up 1.3% at 47,120-47,320 yuan per tonne and the LME/Shanghai copper arb ratio remains around 7.99.

September iron ore prices on the Dalian Commodity Exchange are up 3.4% at 466 yuan per tonne, this is the third day where prices have gained over 3%. On the SHFE, steel rebar prices are up 0.8%, while gold prices are down 0.2% and silver prices are up 0.2%.

In international markets, spot Brent crude oil prices are up 0.2% at $47.50 per barrel and at 2.22% the yield on the US ten-year treasuries has held on to recent gains.

Equity markets on Wednesday saw the Euro Stoxx 50 close down 0.1%, while the Dow and Nasdaq composite closed up 0.7% and 1.4%, respectively, shaking off Tuesday’s jitters – they were helped by major US banks clearing the Federal Reserve’s stress tests – most with flying colours. Asia has followed the US lead, with the Nikkei and Hang Seng up 0.4%, the Kospi up 0.5%, the Hang Seng is up 0.8% and the ASX 200 is up 0.9%.

The dollar index continued its slump on Wednesday and at 95.91 is weak this morning too, this as the euro (1.1398), sterling (1.2956) and the Australian dollar (0.7652) push higher as the European Central Bank (ECB) and Bank of England turn more hawkish and the Australian dollar benefits from a rebound in commodity prices. The yen, however, is flat 112.21 as its monetary policy is more likely to remain as it is.

The yuan broke its weaker trend on Tuesday, with the currency rising to 6.8095, it gapped higher to 6.8005 on Wednesday morning and has gapped higher again this morning, it was recently quoted at 6.7790. Reports that the ECB has started to hold yuan-denominated assets is being seen as a sign of approval for the yuan to evolve into an international currency. The peso is firmer, while most of the other emerging market currencies we follow are flat.

Japan’s retail sales grew 2%, down from 3.2% previously and an expected 2.6%, but the overall trend is positive. Later there is data on German Gfk consumer climate and consumer price index (CPI), there is also Spanish CPI and data on UK lending and M4 money supply. US data includes a final reading on gross domestic product (GDP), it is expected to show 1.2% growth in the first quarter, initial jobless claims, GDP price index and natural gas storage – see table below for more details.

We have been expecting base metals prices to work higher and that has unfolded. On Wednesday, they managed to shake off equity market jitters from Tuesday and with aluminium prices managing to rebound too, the base metals complex is looking more robust. Tighter spreads suggest short-covering while falling stocks and a weaker dollar are supportive too.

Gold prices are edging higher, no doubt buoyed by the weaker dollar, but with equities rebounding from Tuesday’s jitters and with the industrial metals looking firmer again, gold prices may struggle on the upside. That said, the fact that equities and bond markets have been jittery may well encourage some rotation out of elevated markets into safer-havens. Silver prices are following gold’s lead, while the PGMs are subdued, with palladium still looking vulnerable on the downside.

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