MORNING VIEW: All quiet in metals markets with China on holiday

Broader markets were generally weaker this morning, Thursday June 25, with those equity markets that were open in the Asian-Pacific region mainly weaker by between 1% and 2%.

  • Pre-market major western equity index futures were down this morning, following Wednesday’s weakness.
  • Gold prices hold up in high ground around $1,760 per oz.
  • International Monetary Fund (IMF) cuts world growth forecast again, now expects a 4.9% fall this year; previously it expected a 3% decline.

Base metals

Three-month base metals prices on the London Metal Exchange were little changed this morning, with copper ($5,878 per tonne) down by 0.2%, nickel ($12,525 per tonne) and lead ($1,767 per tonne) were up by 0.2% and 0.3% respectively, while the rest were unchanged.

With China on holiday, LME volume has been light with just 2,032 lots traded as of 5:55am London time.

Precious metals
Spot gold prices were consolidating after extending gains this week; prices were recently quoted at $1,760 per oz, while Wednesday’s high was $1,779.40 per oz. Next resistance levels on the upside are $1,796.05 per oz, the high from October 2012, and $1,921.12 per oz, the all-time high from September 2011.

Spot silver prices were up by 0.3% at $17.57 per oz this morning, while platinum ($808 per oz) and palladium ($1,881.50 per oz) were both up by 0.6%, this after falls of 2.3%, 3.4% and 3.3% respectively on Wednesday.

Wider markets
The yield on US 10-year treasuries dropped to 0.67% this morning, which compares with 0.72% at a similar time on Wednesday - this has been the lowest it has been for a while now, suggesting markets are more risk-off.

Asian-Pacific equities were weaker this morning: the Nikkei (-1%), the Kospi (-1.77%) and the ASX 200 (-2.28%), with the Hang Seng and CSI 300 closed.

The US dollar index is stronger this morning; it was recently quoted at 97.25, this after 96.64 at a similar time on Wednesday. Overall, the dollar seems to be consolidating after the fall from the 100 level seen over the March-May period.

With the dollar firmer, the other major currencies, including the yen, were weaker this morning: the euro (1.1250), the Australian dollar (0.6871), sterling (1.2424) and the yen (107.18).

Key data
Thursday’s economic agenda is busy; data already out showed Japan’s all industries activity fell by 6.4%, but this is data for April so is quite old now. Germany’s GfK consumer climate index for June came in at -9.6, it had been expected to come in at -11.7, this after a drop of 18.6 in May.

Later there is data on UK realized sales, the European Central Bank’s policy meeting accounts and a host of US data including durable goods orders, final gross domestic product, initial jobless claims, goods trade balance, whole inventories and the results of the Federal Reserve’s US bank stress tests.

Today’s key themes and views
Copper is holding up in high ground, no doubt underpinned by concerns over potential supply disruptions should Covid-19 cause mines to reduce output, but the continuing rapid drawdown in Shanghai Futures Exchange copper stocks may be another factor. Stocks dropped by 9% to 99,971 tonnes this week, and are down from 310,000 tonnes in late February. The other metals are drifting back from high ground, which seems to reflect the economic uncertainty more, but they too could suffer further supply disruptions.

Gold prices resumed their upward trend this week and that suggests there has been an increase in investors’ caution. We expect dips to be well supported, weakness in equities may see some initial ‘dash-for-cash’ selling in gold, but overall we expect the uptrend to continue.




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