METALS MORNING VIEW 01/12: Metals prices consolidate, some buying emerging

Base metals prices on the London Metal Exchange are for the most part firmer this morning, Friday December 1.

Tin is the exception with a 0.5% drop, while the rest are up an average of 0.3% - led by 0.5% rebounds in lead and aluminium prices. Three-month copper prices are up by 0.2% at $6,785 per tonne, this after a low of $6,720 on Thursday, which held above the lows from mid-November.

Volume has been average with 8,626 lots traded as of 07.39am London time.

Gold and silver prices are little changed this morning at $1,275.47 per oz and $16.42 per oz respectively, this after two days of weakness, which seems ironic considering it was on Wednesday that North Korea restarted its missile testing. The platinum group metals are up by around 0.4% this morning, with palladium prices managing to hold up above $1,000 per oz.

On the Shanghai Futures Exchange today, nickel and tin prices are lower by 1.5% and 1% respectively, while the rest are up by an average of 1.2%. Copper prices are up by 0.3% at 52,900 yuan ($8,001) per tonne, while spot copper prices in Changjiang are up by 0.2% at 52,680-52,860 yuan per tonne and the LME/Shanghai copper arbitrage ratio is firmer at 7.81, compared with 7.79 on Thursday, which suggests SHFE prices are holding up better than LME copper prices.

In other metals in China, iron ore prices continue to rise, they are up by 1.9% to 526 yuan per tonne on the Dalian Commodity Exchange. On the SHFE, steel rebar prices are 0.5% weaker, while gold and silver prices are off by 0.9% and 1.4% respectively.

In international markets, spot Brent crude oil prices are up by 0.7% at $63.08 per barrel. The yield on US ten-year treasuries have strengthened to 2.41% and the German ten-year bund yield has firmed to 0.36%.

Equities in Asia this morning are mixed, the Nikkei is up by 0.41%, the ASX 200 is up by 0.33%, while the Hang Seng, CSI 300 and Kospi are down by 0.27%, 0.2% and 0.04% respectively. This follows a 1.39% rise in the Dow Jones on Thursday to 24,272.35, while the Euro Stoxx 50 closed down by 0.56% at 3,569.93.

The dollar index at 92.91 is weaker again and therefore the dollar is looking vulnerable - our line in the sand remains at 92.50. The euro at 1.1925 is looking strong and is well placed to tackle the highs seen over the summer, conversely the yen at 112.62 is looking weaker. Sterling at 1.3520 is also strong, but prices are consolidating this morning, the yen is weaker at 112.61. The Australian dollar at 0.7584 is little changed, but remains weak overall.

The yuan at 6.6068 is little changed, most of the other emerging currencies we follow are consolidating having been strengthening of late, although the Mexican peso remains upbeat.

Today’s economic agenda is busy with the focus on manufacturing purchasing managers’ indices (PMI). In addition, there is US data on construction spending, and total vehicle sales. US Federal Open Market Committee members Robert Kaplan and Patrick Harker are speaking.

Copper, zinc, lead and tin, have found support at or ahead of support levels and are getting some lift, suggesting the recent weakness has been the result of profit-taking, but bargain hunting has provided support. Aluminium and nickel prices have broken below support, while we expect aluminium prices will run into support for fundamental reasons tied in to the Chinese winter cutbacks, we would not be surprised to see nickel prices retreat further. Overall we remain quietly bullish for most of the metals, but at these already high prices, trading is likely to remain range bound.

Gold prices pulled back from the top of their range on Wednesday and saw further weakness on Thursday, the fact they did despite the pick-up in geopolitical tension is surprising. Silver prices have fallen even harder. Platinum prices are also weaker but have for a change held up better than gold, while palladium prices are consolidating above the $1,000 per oz level. Given North Korea’s latest move we would be wary of being too bearish on gold.

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

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