MORNING VIEW: Base metals prices mixed, but dips generally continue to find support

Base metals prices on the Shanghai Futures Exchange were up across the board this morning, Thursday December 24, while those on the London Metal Exchange were mixed.

Metals and broader markets seem to be settling down ahead of the Christmas and New Year holidays, with dips still being bought, suggesting markets are content to consolidate while many cross currents muddy the waters.

  • Markets seems to be approaching year-end with a high level of confidence

Base metals
Three-month base metals prices on the LME were mixed this morning, with copper, zinc and lead prices down by an average of 0.3%, with copper down by 0.3% at $7,825 per tonne, while the rest were up by an average of 0.4%.

The most-traded base metals contracts on the SHFE were stronger this morning with prices up by an average of 0.9%, led by a 1.4% rise in the February lead contract. February copper was up by 0.7% at 58,120 yuan ($8,882) per tonne. The strong tone in China, reflects the rebound in metal prices on the LME on Wednesday.

Precious metals
The spot gold price was firmer this morning, up by 0.2% at $1,875.80 per oz, as were those for silver ($25.79 per oz) and platinum ($1,023.10 per oz) that were up by 0.9% and 0.8% respectively, while the price of palladium ($2,324.20 per oz) was down by 0.2%.

Wider markets
The yield on US 10-year treasuries was stronger and recently quoted at 0.96%, compared with 0.90% at a similar time on Wednesday, suggesting a pick-up in risk-on sentiment.

Asia Pacific equities were mainly firmer this morning: the ASX 200 (+0.33%), the Nikkei (+0.54%), the Hang Seng (+0.17%) and the Kospi (+1.7%), while the CSI (-0.24%) bucked the trend.

The US dollar index was drifting again and was recently quoted at 90.23, compared with 90.47 at a similar time on Wednesday.

The other major currencies were mixed this morning, the euro (1.2205) was consolidating, the Australian dollar (0.7591) and sterling (1.3551) were firmer and the yen (103.58) was weaker. For sterling, all eyes are on whether a Brexit deal is announced today.

Key data
With many markets closing early for Christmas Eve there is no key data out in Europe and the United States, although there may well be news on Brexit and the US stimulus package.

Today’s key themes and views
While the uptrends in the metals have run out of steam in recent days, dips have continued to be bought and that is even in nickel and lead, the two metals that have seen the biggest pullbacks in recent days.

Overall, it looks like confidence in the base metals remains high with the market expecting stronger demand to feed through next year while infrastructure spending accelerates and as economies get stronger once vaccines are deployed. But there is little room for complacency given how strong prices are already, while the pandemic is still rampant and prices are thought to have run ahead of the fundamentals.

Gold prices have been strengthening again in recent weeks and that may well reflect a pick-up in risk-off sentiment ahead of the holiday period. The increased uncertainty that has come with the new variant of the Covid-19 is likely to be a further supporting factor.

The next Morning View will be on January 4, 2021.



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