METALS MORNING VIEW 14/10: Metals prices trade sideways to lower

Base metals prices traded on the London Metal Exchange are for the most part weaker this morning, Tuesday November 14. Tin prices are bucking the trend with 0.2% gain, while the rest are down by an average of 0.6% - somewhat skewed by a 1.5% drop in nickel prices and 1.1% fall in lead prices. Three-month copper prices are off by 0.2% at $6,882 per tonne.

Volume has been average with 6,135 lots traded as of 06:55 GMT.

This follows a day of strength on Monday when the base metals complex recovered in afternoon trading to close up by an average of 0.9%, led by a 3.3% rise in nickel prices and a 1.5% rise in copper prices.

Precious metals prices are split this morning: spot gold and silver prices off by 0.1%, with the former at $1,276.30 per oz, while the platinum group metals are firmer with palladium prices up by 0.8% at $995.80 per oz and platinum prices up by 0.3% at $930.70 per oz. This follows a 1.1% rally in silver prices on Monday, while gold and platinum prices closed 0.2% higher and palladium prices dropped by 0.6%.

On the Shanghai Futures Exchange today, the base metals complex is mixed with copper prices up by 1.1% at 54,100 yuan ($8,145) per tonne and lead prices leading on the downside with 1.1% fall. Aluminium prices are off by 0.6%, zinc prices are little changed, while gains are being seen in nickel (+0.5%) and tin (+0.3%). Spot copper prices in Changjiang are also up by 1.1% at 53,340-53,540 yuan per tonne and the LME/Shanghai copper arb ratio is slightly firmer at 7.86, after 7.85 on Monday.

In other metals in China, iron ore prices are up by 1.4% to 485.5 yuan per tonne on the Dalian Commodity Exchange. Meanwhile on the SHFE, steel rebar prices are up by 0.8% and gold and silver prices are down by 0.2% and 0.1%, respectively.

In international markets, spot Brent crude oil prices are down by 0.38% at $62.83 per barrel. The yield on US ten-year treasuries are firmer at 2.41% and the German ten-year bund yield is stronger at 0.43%.

Equities in Asia are weaker this morning with the ASX 200 off by 0.88%, the CSI 300 is down by 0.69%, the Kospi is off 0.15%, while the Nikkei and Hang Seng are little changed. This follows a mixed performance in the Western markets on Monday where in the United States, the Dow Jones closed up by 0.07% at 23,439.70 and in Europe, where the Euro Stoxx 50 closed down by 0.54% at 3,574.52.

The dollar index at 94.41 is slightly weaker, the recent double high being 95.15 on October 27 and November 7. The overall trend since mid-September seems to be an upward one, but it could still be a counter-trend move within the 2017 downward trend. The direction of the dollar is going to be important - the strength of late does seem to be acting as a headwind for the metals, especially gold. For now, we expect further dollar strength. That said, the euro at 1.1686 is getting some lift, but the other majors are flat-to-weaker with sterling at 1.3101, the Australian dollar at 0.7631 and the yen at 113.72. The yuan at 6.6404 is also looking weaker, along with the rupee and rand, while the ringgit is stronger.

The economic calendar is very busy today with a lot of important data releases and there is a European Central Bank summit with numerous top central bankers speaking too. This could well cause some choppiness in today’s trading. See table below for more details.

The base metals are on divergent paths: tin is the weakest of the complex, aluminium showed weakness last week, while the rest are holding up better but do not seem in a hurry to become directional again. This suggests trading is balanced up at these high price levels. Overall we expect prices to generally hold up well and we remain bullish of the fundamentals, but prices may have already discounted the present bullishness.

The precious metals are split into two camps: palladium is trading its own bullish fundamentals although there does seem to be supply above $1,000 per oz, while gold, silver and platinum are trading sideways – which suggests good underlying support, but not a particularly bullish environment for gold, given the reduced tension over North Korea and mildly hawkish US Federal Reserve.

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

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