METALS MORNING VIEW 03/10: Most metals prices finding support

Three-month base metals prices on the London Metal Exchange were for the most part firmer during morning trading on Wednesday October 3.

The exceptions were tin where prices were down by 0.5% and nickel where prices were little changed. The rest were up between 0.2% for copper at $6,267 per tonne and 0.6% for zinc at $2,674 per tonne.

With Chinese markets still closed for the Golden Week holiday, volume has been light with 1,590 lots traded as at 7.00am London time.

This follows a day of strength on Tuesday when the LME base metals complex closed up by an average of 0.7%, led by a 1.3% rise in aluminium prices.

In the precious metals this morning, spot gold prices were up by 0.1% at $1,205.71 per oz, while the rest were up between 0.3% and 0.4%. This follows strong gains in gold, silver and platinum on Tuesday that averaged 1.1%, while palladium prices consolidated in high ground with prices down 0.3%.

In wider markets, spot Brent crude oil prices were higher by 0.34% and were recently quoted at $84.84 per barrel. The yield on US 10-year treasuries has firmed to 3.0753% and the German 10-year bund yield has eased and was recently quoted at 0.4500%.

Asian equity markets were mixed on Wednesday with the Nikkei down by 0.65% as it consolidates having recently set multi-decade highs. The Hang Seng is off by 0.4% and the ASX 200 is up by 0.32%. This follows a mixed performance in western markets on Tuesday; in the United States, the Dow Jones closed up by 0.46% at 26,773.94, while in Europe, the Euro Stoxx 50 was down by 0.74% at 3,388.99.

The dollar index climbed to 95.74 on Tuesday but then ran out of steam – it was recently quoted at 95.32. For now the index is stuck in a sideways range where it has been since June, which was around the time that the US trade disputes gathered momentum and the metals came under downward pressure. So we are still waiting for a clearer direction from the dollar.

With the dollar’s recent rise coming to a halt, the other currencies were firmer: the euro (1.1582), sterling (1.3003), although the yen (113.76) and the Australian dollar (0.7178) remain weak.

The emerging currencies we follow were quite diverse with weakness being seen in the rupiah and rupee, while the peso, rand and ringgit were flat or consolidating and the real and rouble are strengthening.

The economic agenda is extremely busy on Wednesday, with services purchasing managers’ index (PMI) data out in in Europe and the US. In addition there is data on EU retail sales and US releases that include the ADP non-farm employment change and crude oil inventories. There are also a number of US Federal Reserve speakers including Tom Barkin, Lael Brainard, Loretta Mester and Jerome Powell.

Data out late on Tuesday showed 17.4 million units, annualized, of US total vehicle sales in September, although down 6.45 million units from September last year, the figure was up from July and August’s readings of 16.8 million units and 16.7 million units respectively.

The base metals prices are looking a bit perkier with aluminium joining zinc in pushing on with their rebounds. Copper also seems to be breaking out of a bull flag on the chart, while the rest are edging higher within their recent sideways ranges. Continuing stock falls, high levels of cancelled warrants and some tighter spreads, combined with some reported large short positions, all suggest there is price risk to the upside.

In the precious metals, silver continues to lead on the upside with gold challenging resistance that runs from around $1,210-1,215 per oz. Platinum seems to be following gold’s lead, while palladium prices are consolidating the strong gains seen over the past six weeks or so. For now we see all the metals, with the exception of palladium, as being in the same boat.

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