METALS MORNING VIEW 27/11: Metals prices run into selling, range trading dominates
Base metals prices on the London Metal Exchange are starting the week on a weak footing with prices down by an average of 1.5% this morning, Monday November 27.
Nickel leads the way with a 3.1% drop to $11,665 per tonne, while tin prices (-0.2%) are the most resilient. The rest of the base metals are down by between 1% for aluminium and 1.8% for zinc, with three-month copper prices off by 1.2% at $6,930 per tonne.
Volume has been high with 9,416 lots traded as of 06.41am London time. High volume and broad-based weakness do not bode well for the day ahead.
This morning’s weaker tone follows a generally positive day on Friday, when the base metals complex closed up by an average of 0.7%.
Spot gold and silver prices up slightly this morning with gains of 0.2% and 0.1% respectively, with gold prices at $1,290.50 per oz. Meanwhile, the platinum group metals are little changed with palladium prices back below the $1,000-per-oz level at $995.20 per oz.
On the Shanghai Futures Exchange today, most of the base metals prices are weaker with only tin bucking the trend with a 0.4% gain. The rest are down by between 0.4% for aluminum and copper prices and 1.6% zinc, with copper recently quoted 53,920 yuan ($8,200) per tonne. Spot copper prices in Changjiang are up by 0.8% at 54,200-54,450 yuan per tonne, suggesting the futures prices have dropped significantly since spot prices were set. The LME/Shanghai copper arbitrage ratio has edged higher to 7.79, compared with 7.77 on Friday.
In other metals in China, iron ore prices are up by 0.9% to 495.50 yuan per tonne on the Dalian Commodity Exchange, steel rebar prices on the SHFE are up by 1.6% and SHFE gold and silver prices are little changed.
In international markets, spot Brent crude oil prices are little changed at $63.72 per barrel. The yield on US ten-year treasuries is firmer at 2.35% and the German ten-year bund yield is little changed at 0.36%.
Equities in Asia this morning are generally weaker with China’s CSI 300 down by 1.46%, this after a day of consolidation on Friday, which followed Thursday’s steep sell-off. So for now China’s equity markets are still in the spotlight. The Hang Seng is down by 0.72%, the Nikkei is off by 0.24% and the Kospi is off by 1.44%, while the ASX 200 is bucking the trend with a 0.1% rise. This morning’s weakness follows on from firmer equities in the United States and Europe on Friday where the Dow closed up by 0.14% at 23,557.99 and the Euro Stoxx 50 closed up by 0.26% at 3,581.23.
The dollar index set a low of 92.67 on Friday and was recently quoted at 92.83, so remains on a back footing. We wait to see if the recent downward trend has further to go, a move down below 92.50 would start to raise questions about whether the fledgling up trend since September is just a counter-trend move within the downward trend that has been underway since the start of the year, rather than the start of an uptrend. Conversely, the euro at 1.1921 is strong, while sterling (1.3316), the yen (111.39) and the Australian dollar (0.7609), are consolidating recent strength.
The yuan at 6.6037 is weaker again, after a show of strength earlier last week, while the other emerging currencies we follow are also consolidating their recent gains, although the Mexican peso is strengthening.
Today’s economic agenda is light with data on US new home sales and with US Federal Open Market Committee member Neel Kashkari speaking.
Last week’s firmer tone in copper prices has halted this morning with prices pulling back to consolidate having reached $7,000 per tonne on Friday. The weakness has been seen across the base metals, so it does look as though range trading is dominating. We wait to see how the markets handle another price pullback to gauge how robust underlying sentiment is.
Gold prices are holding up well, no doubt supported by the weaker dollar, but there does seem to be resistance ahead of $1,300 per oz. Silver and platinum prices appear to have found bases and look set to remain rangebound for now, albeit with a slight upside bias, while Palladium prices seem to have encountered supply above $1,000 per oz. Overall, we would look for more range trading.
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