METALS MORNING VIEW 26/01: Metals looking robust

Base metals prices on the London Metal Exchange are mixed this morning, Friday January 26, with the complex up by an average of 0.2%.

Three-month nickel prices ($13,800 per tonne) are strongest with a 0.6% gain, lead prices ($2,599 per tonne) and copper prices ($7,143 per tonne) are up by 0.5% and 0.4% respectively, while aluminium, zinc and tin are down between 0.1% and 0.2%.

This week has seen considerable volatility and at times price divergence within the base metals camp, with tin prices reaching multi-month highs, nickel prices setting multi-year highs, zinc and lead extending highs, while aluminium prices have been consolidating in high ground and copper prices have been particularly volatile as prices have been knocked lower by large stock increases into LME-registered warehouses, but have managed to rebound despite the increases.

The precious metals are for the most part firmer this morning, gold prices are little changed at $1,355.58 per oz, but silver, platinum and palladium prices are up by an average of 0.8%. Recently gold and platinum prices have been extending gains, while silver and palladium have been consolidating.

On the Shanghai Futures Exchange today, base metals prices are for the most part weaker, the exception is nickel, where prices are up by 1.7%, while the rest are down by an average of 0.5%, with copper prices off by 0.2% at 53,430 yuan ($8,440) per tonne. Spot copper prices in Changjiang are down by 0.6% at 53,160-53,310 yuan per tonne and the LME/Shanghai copper arbitrage ratio has weakened to 7.49, up from 7.53 on January 19.

In other metals in China, iron ore prices are down by 1.3% at 519 yuan per tonne on the Dalian Commodity Exchange. On the SHFE, steel rebar prices are down by 0.3%, while gold and silver prices are off by 0.5% and 0.1% respectively.

Equities in Asia are mixed today: CSI 300 (0.37%), Hang Seng (1.53%), Nikkei (-0.16%) and Kospi (0.49%), while the ASX 200 is closed for Australia Day. This follows a strong performance in western markets on Thursday, where in the United States the Dow Jones closed up by 0.54% at 26,392.79, having earlier set a fresh high (26,458.25), and in Europe where the Euro Stoxx 50 closed up by 0.29% at 3,640.75.

The dollar index at 88.89 remains in a downward trend with contradictory comments from US President Donald Trump and US Treasury Secretary Steven Mnuchin causing volatility, and with Trump speaking at the World Economic Forum in Switzerland this afternoon, the volatility is likely to continue.

The weakness in the dollar is underpinning strength in other currencies: euro (1.2458), sterling (1.4224), yen (108.96) and the Australian dollar (0.8085). The yuan continues to strengthen and was recently quoted at 6.3184 - it ended 2017 at around 6.5060. Most of the emerging currencies we follow are stronger too.

The economic agenda is busy today, with EU M3 money supply and private loans, UK gross domestic product (GDP) and index of services as well as US data that includes including GDP, durable goods orders, goods trade balance and wholesale inventories. In addition there is data out on China’s leading indicators and Bank of England governor Mark Carney and Bank of Japan governor Haruhiko Kuroda are speaking.

The base metals are for the most part looking strong and buoyant, even copper has shaken off its stock-increase induced sell-off. The weaker dollar is no doubt prompting some non-dollar buying of metals but overall upward momentum and a bullish outlook seems to be underpinning the stronger prices. We remain bullish overall but expect trading to remain choppy at these high price levels.

Gold and platinum are looking the stronger of the precious metals, although palladium is already extremely strong. We think platinum is starting to recover from the torrid times of recent years, while gold prices seem to be attracting interest from those looking to diversify their portfolios given so much strength across markets.

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

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