METALS MORNING VIEW 25/08: Metals hold steady in high ground

The rallies in the base metals on the London Metal Exchange have generally continued in early trading today, Friday August 25, with prices up by an average of 0.4%, with aluminium, zinc, lead and copper prices up between 0.6% to 0.8%, while nickel is off 0.5% and tin is little changed. Three-month copper prices are at $6,740 per tonne.

This morning’s stronger tone follows a broadly weaker performance on Thursday when copper prices rallied 1.7%, while lead prices slipped 1.2%, aluminium and nickel were off by around 0.4% and zinc and tin were little changed.

Precious metals prices are up across the board this morning with gains averaging 0.3%, silver leads the gains with a 0.4% rise to $16.98 per oz, the platinum group metals (PGM) are both up by 0.3% and gold prices are up by 0.1% at $1,286.60 per oz.

On the Shanghai Futures Exchange (SHFE) this morning, lead prices are once again bucking the trend, they are down by 0.2%, while the rest are up between 0.1% for tin and 1.7% for copper, which was recently quoted at 52,630 yuan ($7,896) per tonne. Spot copper prices in Changjiang are up by 1.4% at 52,220-52,400 yuan per tonne and the LME/Shanghai copper arb ratio is weaker at 7.81 (down from 7.83 on Wednesday).

Steel rebar and iron ore prices in China continue to rebound after Wednesday’s weakness; SHFE rebar prices are up by 3% and iron ore prices on the Dalian Commodity Exchange are up by 0.3% at 585.50 yuan per tonne on the January 2018 contract, while gold and silver prices on SHFE are off by 0.2% and 0.3% respectively.

In international markets, spot Brent crude oil prices are up by 0.8% at $52.53 per barrel, concerns over hurricane Harvey in the Gulf of Mexico have lifted oil prices. The yield on US ten-year treasuries is firmer at 2.19% and the German ten-year bund yield is little changed at 0.38%.

Equities in Asia are mainly stronger this morning – gains are being seen on the CSI 300 (1.6%), the Hang Seng Index (+1.1%), the Nikkei (+0.5%) and the Kospi (+0.1%), while the ASX 200 is little changed. In the USA, the Dow Jones closed down 0.1% at 21,783.40 and in Europe, the Euro Stoxx 50 closed up 0.2% at 3,444.73.

The dollar index at 93.41 is consolidating above low ground, with the market waiting to hear what messages emerge for the central bankers’ meeting at Jackson Hole. The euro at 1.1780 and the Australian dollar at 0.7913 are also consolidating, while the yen at 109.67 is slightly weaker as is sterling at 1.2801. The yuan at 6.642 is firm, while the other emerging market currencies we follow are little changed.

On the economic agenda, Japan’s CPI picked up, while services PPI dropped, Germany’s final GDP was unchanged at 0.6%, while import prices eased 0.4%, compared with a 1.1% fall previously. Later there is data on German Ifo business climate. US data included durables goods orders, while the focus will be on speeches by US Federal Reserve chair Janet Yellen and European Central Bank president Mario Draghi at the Jackson Hole Symposium.

Price strength and consolidation seems to be the order of the day in the base metals, with tin and lead remaining the laggards. Given the overall upward momentum, we would not be surprised to see prices rise further, but as prices are in high ground we should expect bouts of forward selling and profit-taking to lead to choppy trading – key will be how well the dips are supported. On balance, we remain bullish for the base metals complex.

Precious metals prices are consolidating in high ground and gold, silver and PGM prices are holding up well for now. Given the geopolitical undercurrent that is not surprising for gold, but the PGMs may be more vulnerable to price corrections, especially palladium.

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

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