METALS MORNING VIEW 03/10: Metals consolidate; lead, zinc well placed to push higher

Base metals prices on the London Metal Exchange are for the most part weaker this morning, Tuesday October 3. The exceptions are aluminium ($2,108.50 per tonne) and nickel ($10,490 per tonne) where prices are up by 0.2% and 0.3%, respectively, while the rest are down between 0.5% for zinc ($3,224.50 per tonne) and 0.1% for tin ($20,660 per tonne). Three-month copper prices are off by 0.4% at $6,465 per tonne.

Volume has once again been light at 1,743 lots traded as of 06:35 BST – but that is to be expected with China on holiday.

This after a divergent day’s trading on Monday when zinc and lead climbed strongly, with gains of 2.4% and 1.4%, respectively, while nickel prices slipped by 0.6%, tin prices were off by 0.3% and copper and aluminium prices were down by 0.1%.

Precious metals prices are split this morning between bullion prices that are weaker and firmer platinum group metal prices. Spot gold and silver prices are both off by 0.1%, with gold at $1,270.04 per oz, while platinum prices are up by 0.2% and palladium prices are up by 0.1%. This follows losses on Monday for most of the precious metals, led by a 2.6% drop in palladium prices to $910 per oz, with silver prices down by 0.1% at $16.595 per oz and spot gold prices closed off by 0.7% at $1,271.60 per oz. Platinum prices bucked the downtrend and rose by 0.2% to $911 per oz.

In international markets, spot Brent crude oil prices are off by 0.2% at $55.89 per barrel, the yield on US ten-year treasuries has eased to 2.35% and the German ten-year bund yield has dropped to 0.45%.

Asian equities that are open are for the most part positive this morning with the Nikkei up by 0.95%, the Hang Seng is up by 1.74%, although the ASX 200 is down by 0.49%. This follows a firmer session on Monday, where in the USA, the Dow closed up by 0.68% at 22,557.60 – it set a fresh intraday record high at 22,559.38; and in Europe, the Euro Stoxx 50 closed up by 0.22% at 3,602.69.

The dollar’s rise paused on September 28 and 29, but it has since pushed higher and at 93.87 is closing in on the August peak of 94.15 – a move above that level would help confirm the dollar index is in an uptrend. Conversely, currencies are under pressure with the euro at 1.1698, sterling at 1.3240, the yen at 113.16 and the Australian dollar at 0.7788. Stronger US data out on Monday, including ISM manufacturing prices rising to 71.5 from 62, helped underpin stronger US markets.

Emerging market currencies are mixed, with most showing weakness on the back of dollar strength, but the Brazilian real is firmer and the Indian rupee is consolidating.

Economic data already out showed Japan’s consumer price index (CPI) rose 0.6% after a previous reading of 0.4% and the country’s consumer confidence edged higher to 43.9 from 43.3. Data out later includes Spanish unemployment, UK construction purchasing managers’ index (PMI), the minutes from the Bank of England’s Financial Policy Committee meeting, EU producer price index (PPI) and US total vehicle sales. In addition, US Federal Open Market Committee member Jerome Powell is speaking.

The base metals are a mixture of strength, weakness and consolidation. Zinc and lead extended gains on Monday and look well placed to work higher although the new high ground is likely to encourage scale-up selling. Copper, tin and nickel prices are consolidating; nickel and copper are just off their recent lows and tin just below highs, while aluminium prices are attempting a rebound. With China and parts of Asia on holiday the market is only firing on two cylinders, but sentiment in lead and zinc is clearly bullish, while in the others, traders seem in no rush to chase prices higher. We are now moving further into the post-summer period when business activity should pick up, so we wait to see if buying picks up again – for now the stronger dollar is unlikely to be helping.

The precious metals continue to correct and the stronger dollar and lull in tensions over North Korea, seem to be weighing on prices. Even palladium prices are looking vulnerable again. We would let the corrections run their course, but the North Korean situation is likely to escalate again at some stage, so the next rally in gold prices may not be that far away.

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

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