METAL MORNING VIEW 20/06: Metals prices pick up a tailwind
Base metals prices on the London Metal Exchange are mixed this morning, Tuesday June 20, with copper and zinc prices both down 0.4% with three-month copper prices at $5,701 per tonne, while the rest of the metals are up between 0.1% and 0.3%.
Volume has been light with 4,175 lots traded as of 06:02 BST. On Monday, prices generally put in a strong performance, the exception was tin that saw prices drop 0.6%, while the rest closed up an average of 1%.
Precious metals prices are up across the board, led by the PGMs that are up 0.5%, silver prices are up 0.4% at $16.54 per oz and gold prices are up 0.1% at $1,245.10 per oz, this follows a negative day on Monday when the prices closed down an average of 0.7%.
In Shanghai this morning, base metals prices on the Shanghai Futures Exchange (SHFE) are generally looking robust, the exception is tin where prices are off 0.5%. The others are up an average of 1.3% ranged between 0.4% for copper at 45,800 yuan per tonne ($6,704 per tonne) and 2.2% for lead. Spot copper prices in Changjiang are up 0.5% at 45,610-45,810 yuan per tonne and the LME/Shanghai copper arb ratio is at 8.03.
In other metals in China, September iron ore prices on the Dalian Commodity Exchange are down 1% at 429 yuan per tonne, on the SHFE, steel rebar prices are off 1.4%, while gold and silver prices are down 0.4% and 0.2%, respectively.
In international markets, spot Brent crude oil prices are little changed at $46.89 per barrel and the yield on the US ten-year treasuries has edged higher to 2.18%.
Equities ended Monday stronger with the Euro Stoxx 50 closing up 1% and the Dow closed up 0.7% at 21,528.99, which is a fresh high. In Asia this morning, markets are mixed; the Nikkei is up 1.1%, while the rest are weaker with the Hang Seng, Kospi and CSI 300 off 0.1% and the ASX 200 is down 0.6%.
The dollar index at 97.52 is firmer, the recent high being 97.78 on May 30. We wait to see if the dollar starts to trend higher again – given more US Federal Open Market Committee (FOMC) members are still talking hawkishly, it may. If so then that could remain a headwind for gold prices. The euro at 1.1156 is looking a bit toppy, sterling at 1.2737 is drifting, the yen is weaker at 111.63, while the Australian dollar is firm at 0.7601.
The yuan at 6.8302 is weaker, while the other emerging market currencies we follow are little changed.
The economic agenda is light today; data out includes German PPI, EU and US current accounts and Chinese leading indicators. In addition, Bank of England governor Mark Carney and FOMC members Stanley Fischer and Robert Kaplan are speaking – see table below for more details.
Base metals prices appear to be heading higher across the board, key now will be whether follow through buying gathers momentum, or whether the rebounds start to stall – but that may be a question for later in the week. For now they generally look well placed to push higher and the strong gains on the SHFE this morning bodes well.
Gold and silver prices are retreating but doing so in an orderly manner, while the PGMs appear to have found support. With the base metals looking stronger, it may well be that the more industrial precious metals do better than gold for a while. If FOMC members continue to talk hawkishly this afternoon then the dollar may break higher and that could be a stronger headwind for gold prices. For now, in the absence of any pick-up in geopolitical, or political tensions we expect gold prices to drift lower.
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