METALS MORNING VIEW 27/06: Aluminium prices remain vulnerable, rest look well placed to work higher

Another quiet start to trading on the London Metal Exchange this morning, Tuesday June 27, with base metals prices mixed and little changed. Copper, aluminium, lead and tin prices are down an average of 0.2%, with three-month copper prices at $5,789 per tonne, while nickel and zinc prices are up 0.6% and 0.2%, respectively.

Volume has been light with 4,485 lots traded as of 06:42 BST.

This follows a choppy day of trading on Monday that saw early gains mostly given back, while aluminium prices pushed lower but closed little changed, nickel prices closed off 0.9% and lead prices closed up 0.9%.

Precious metals are for the most part firmer this morning with gold and silver prices up 0.2% – spot gold was recently at $1,245.57 per oz. This comes after a sudden sell-off yesterday morning on the back of a large sell order that hit the market when liquidity was thin. Gold closed yesterday 1.1% weaker and silver closed down 0.8%. Platinum prices are up 0.6%, having fallen 1.3% yesterday and palladium prices are little changed, having climbed 0.9% on Monday. The dips seem to have attracted dip buying.

In Shanghai this morning, base metals prices on the Shanghai Futures Exchange (SHFE) are mixed; zinc and lead prices are up 0.3% and 0.4%, respectively, copper prices are down 0.1% at 46,500 yuan per tonne ($6,797 per tonne), aluminium prices are down 0.8%, nickel prices are down 0.4% and tin prices are down 1%. Spot copper prices in Changjiang are up 0.1% at 46,230-46,380 yuan per tonne and the LME/Shanghai copper arb ratio is at 8.03.

Other industrial metals in China are stronger with September iron ore prices on the Dalian Commodity Exchange up 3.1% at 444.50 yuan per tonne. On the SHFE, steel rebar prices are up 1.8%, while gold prices are down 0.7% and silver prices are down 0.8%.

In international markets, spot Brent crude oil prices are little changed at $45.89 per barrel and the yield on the US ten-year treasuries has eased to at 2.13%.

Equity markets on Monday were firmer with the Euro Stoxx 50 closing up 0.5% and the Dow closed up 0.1% at 21,409.55. Asia, however, is mixed this morning with the Nikkei up 0.4%, the Kospi up 0.2%, the Hang Seng down 0.2%, the CSI 300 down 0.3% and the ASX 200 down 0.1%.

The dollar index at 97.34 is consolidating in mid-ground of its possible base formation. The euro is consolidating in high ground at 1.1196, sterling is at 1.2733 and the yen is easing at 111.70, while the Australian dollar is strengthening at 0.7595.

The yuan continues with its weaker trend at 6.8417, giving back more of the gains seen in the second half of May, which came after its credit downgrade. The other emerging market currencies we follow are mixed, but if anything are slightly firmer, which suggests little concern.

Today’s economic agenda is heavy on central bank speakers but light on data with UK CBI realised sales, US house prices, US consumer confidence and Richmond Fed manufacturing. Speakers include European Central Bank president Mario Draghi, Bank of England governor Mark Carney, US Federal Open Market Committee members Patrick Harker and Neel Kashkari and US Federal Reserve chair Janet Yellen – see table below for more details.

The base metals are still split between copper, lead, zinc and nickel prices that have been able to climb of late and look well placed to continue higher, while tin prices have been choppy and are consolidating off the recent lows, but aluminium is under pressure. Light metal prices set a fresh low on Monday at $1,855 per tonne, the lowest since mid-March and the market looks toppy, but dips continue to attract enough dip buying to prevent a sell-off – but not enough to lead to follow through buying. Whether it will go it alone on the downside remains to be seen.

Gold prices are recovering from Monday’s spike lower and at $1,250 per oz prices are generally consolidating and given a fairly quiet geopolitical and US political scene, we do not see too much demand for safe havens, so we expect more of the same. Silver and platinum prices continue to follow gold’s lead, while palladium prices consolidate below recent peaks, with dip buying evident, although overhead supply seems evident too.

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

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