METALS MORNING VIEW 12/01: Gold prices push ahead, recapture $1,200 per oz

In the absence of an LMEselect price feed, we will focus on Shanghai Futures Exchange trading this morning, Thursday January 12.

The base metals on the SHFE were trading down an average of 1.4% as of 06:25 GMT, led by a 3.7% fall in tin, with nickel off 2.2%, lead down 1.5%, zinc off 1.2%, copper off 0.1% at 46,900 yuan per tonne, while aluminium is bucking the trend with a 0.4% gain. Spot copper in Changjiang is up 0.2% at 46,770-46,970 yuan.

In other metals in China, May iron ore prices are up 2.1% on the Dalian Commodity Exchange, on SHFE steel rebar prices are up 1%, gold prices are up 0.1% and silver prices are off 0.2% as they consolidate recent gains.

Equities were firmer on Wednesday, with the Euro Stoxx 50 up 0.1% and the Dow went on to climb 0.5%, this despite the speech from president-elect Donald Trump that did not mention much on policy and was more about fire-fighting his own situation. Lack of meat on the policy skeleton may well disappoint markets and set the market up for increased volatility in the weeks and months ahead. Equities in Asia are generally weaker this morning with the Nikkei off 1.2%, the Hang Seng is off 0.7%, the CSI 300 is down 0.4%, the ASX 200 is down 0.1%, while the Kospi is up 0.6%.

In FX, the dollar index may also be showing disappointment as it has fallen to fresh lows with the index at 101.24. Conversely the euro is edging higher at 1.0627, the yen is firmer at 114.36, the Australian dollar is racing higher at 0.7466 and even the sterling is getting a bit of a lift, it was recently quoted at 1.2237. In other markets, the yuan is slightly firmer at 6.9096, as are most of the other emerging market currencies we follow, with the exception of the Mexican peso that is in low ground at 21.9090, compared with around 18.5000 before the US election. The general strength in EM currencies seems to be based on the stronger commodities, but it also suggests little broad-based fear ahead of the US inauguration.

Data out earlier today showed Japan’s economic watchers sentiment climbed to 51.4 from 48.6, later there is data on French CPI, Italian and EU industrial production, the minutes of the ECB monetary policy meeting, with US data including initial jobless claims, import prices, natural gas storage and the US Federal budget balance. In addition, US Federal Open Market Committee members Charles Evans and Patrick Harker are speaking this afternoon.

LME base metals put in a mixed performance on Wednesday, with most of the metals giving up earlier gains – indeed by the close yesterday prices were down an average of 1.1% having started European trading up an average of 0.3%. Aluminium was the only metal to end in positive territory, while nickel prices dropped 4.2%. Although the trend so far this year has been bullish, we would not be surprised to see traders lighten-up ahead of the US inauguration and with that eight days away trading may well start to get more choppy – although the weaker dollar may provide some support. That said, any weakness in the dollar may mean confidence in the new US administration is waning, which could be a negative for markets generally.

Precious metals prices are stronger this morning with spot gold prices recapturing the $1,200 per oz level – we have seen the run up in gold prices as being driven by a fresh haven buying ahead of the geopolitical uncertainty that the change-over of US presidents brings. Silver and platinum are following gold’s lead, while palladium prices that have been showing independent strength are consolidating ahead of November’s highs. We remain bullish for gold as a haven.

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