LME base metals prices find support, but rebounds remain fragile

Base metals prices on both the London Metal Exchange and Shanghai Futures Exchange were for the most part firmer this morning, Thursday November 11 - it would seem dip-buying has dominated once again.

  • Consumer prices in the United States and China rise more than expected.
  • US Dollar Index shoots up to 95 while the rally extends.

Base metals
Three-month base metals prices on the LME were mainly stronger this morning, the exception being lead ($2,332.50 per tonne) that was down 0.3%. The rest were up by an average of 1.3%, led by a 2.1% rise in aluminium ($2,632 per tonne), with copper up by 1.2% at $9,590 per tonne.

Likewise, most of the December base metals contracts on the SHFE were firmer, the exception also being lead that was down by 0.9%. The rest were up by an average of 2.3%, led by a 4.3% rise in tin, with aluminium up by 3.6% and copper up by 0.5% at 70,550 yuan ($11,037) per tonne.

Lead prices seem to be lagging, but lead was the metal that held up the best during the recent downside correction across the base metals.

Precious metals
Spot gold prices were up by 0.2% at $1,852.52 per oz, this after a 1% rise on Wednesday. Silver ($24.89 per oz) and platinum ($1,081 per oz) were up by 1% and 1.3% respectively this morning, while palladium was off 0.2% at $2,031.20 per oz. It does look as if the pick-up in inflation is driving gold, this is especially so given gold prices are up while the dollar is rallying.

Wider markets
The yield on US 10-year treasuries has jumped to 1.55% this morning, compared with 1.47% at a similar time on Wednesday – once again we see this as the market being more hawkish than the Federal Reserve.

Asia-Pacific equities were mixed on Thursday morning: the Nikkei (+0.59%), the ASX 200 (-0.57%), the CSI 300 (+1.57%), the Kospi (-0.18%) and the Hang Seng (+1.28%).

The US Dollar Index was extending gains this morning and was recently at 95, compared with 94.14 at a similar time on Wednesday.

With the US dollar climbing, the other major currencies were under pressure: the euro (1.1478), the Australian dollar (0.7310), sterling (1.3411) and the Japanese yen (113.95).

Key data
Economic data already out on Thursday showed a barrage of mixed data from the United Kingdom, including gross domestic product, industrial production, manufacturing production, index of services, goods trade balance and business investment – see table below for details.

Later there is a European Central Bank economic bulletin and economic forecasts from the European Union.

In addition, UK Monetary Policy Committee member Catherine Mann is scheduled to speak.

Thursday’s key themes and views
Earlier in the week we were waiting to see if there would be follow through-buying after the initial rebound on Monday. Since then, prices have generally been consolidating, albeit with a slight upward bias. While China may have the brakes on, the rest of the world still looks structurally bullish, with infrastructure projects under way, shipping congestion and low stock levels affecting availability, which in turn in creating pent-up demand.

The precious metals are performing strongly, with gold, silver and platinum breaking higher through resistance levels, while palladium is still stuck in a sideways range. Gold seems to be leading the way, with its focus on inflation.