METALS MORNING VIEW 23/07: Metals prices consolidate after Friday’s rebounds

Three-month base metals prices on the London Metal Exchange were up across the board by an average of 0.5% on the morning of Monday July 23. Gains were ranged between 0.1% for aluminium and 1.2% for zinc, with copper up by 0.3% at $6,172 per tonne.

Volume has been above average with 10,555 lots traded across the complex as at 7.49am London time.

This follows a strong performance by the LME base metals on Friday, with the complex closing up by an average of 0.8%.

Gold prices were little changed at $1,230.33 per tonne this morning, with silver prices unchanged at $15.48 per oz, while platinum prices were up by 0.2% and palladium prices were off by 0.3%. This follows on from Friday, where the precious metals had average gains of 1.7%.

In China, base metals prices on the Shanghai Futures Exchange were mixed: lead and tin were weaker, down by 0.3% and 0.4% respectively, while copper, aluminium and zinc were up between 1.2% and 1.5%, and nickel was up by 0.5%. The most-active September copper contract was up by 1.2% at 48,920 yuan ($7,226) per tonne.

Spot copper prices in Changjiang were up by 1% at 48,620-48,850 yuan per tonne and the LME/Shanghai copper arbitrage ratio was at 7.92, down from 7.97 on Friday.

In other metals in China, the September iron ore contract on the Dalian Commodity Exchange was up by 0.9% at 473.50 yuan per tonne. Meanwhile on the SHFE, the October steel rebar contract was up by 0.8%, and the December gold and silver were both up by 0.6%.

In wider markets, spot Brent crude oil prices were up by 0.11% at $73.08 per barrel this morning and the yield on US 10-year treasuries was firmer at 2.8961%, while the German 10-year bund yield was stronger at 0.3900%.

Asian equity markets were mixed on Monday: Nikkei (-1.33%) the Kospi (-0.87%), the ASX200 (-0.93%), the Hang Seng (+0.21%) and CSI 300 (+0.87%). This follows a weaker performance in western markets on Friday, where in the United States the Dow Jones closed down by 0.03% at 25,058.12, and in Europe where the Euro Stoxx 50 closed down by 0.33% at 3,460.03.

The dollar index at 94.43 is consolidating after Friday’s weakness that saw it drop from Thursday’s high at 95.66. Sterling is rallying (1.3141), as are the euro (1.1725), the yen (111.00) and the Australian dollar (0.7417).

The yuan remains weak at 6.7743 and most of the other emerging market currencies we follow are on a back foot, the exception is the real that is getting some lift off recent low ground.

On the economic agenda there is a German Bundesbank monthly report, data on EU consumer confidence and US existing home sales. In addition, Bank of England deputy governor Ben Broadbent is speaking.

After long drawn-out price weakness, the base metals seem to have found some support and prices are seeing some follow-through buying after last Friday’s rebounds. Key will be whether there is further follow-through buying now as that could prompt short-covering as well as bargain hunting. That said, the trade war rhetoric continues so consumers may not have that much confidence and therefore may not be in any hurry to chase prices higher.

Underlying tails on the spot gold price chart suggests dip-buying was around on July 19 and 20, so we wait to see if there is follow-through buying. Given US President Donald Trump is raising the geopolitical temperature over Iran’s oil exports as well as continuing to wage trade wars, it would not be surprising if gold started to attract some haven buying now that prices have pulled back by around 11% from April’s high.

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Shanghai Futures Exchange, base metals prices

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