by Will Adams
Precious metals closed down an average of one percent, led by a 1.4 percent decline in gold to $1,209.10 – the low on gold yesterday was $1,202.10.
Most of the base metals put in a strong performance on Monday, with average gains of two percent seen across copper, aluminium, zinc and nickel, while lead fell 1.2 percent and tin closed down 0.2 percent. Copper closed at $4,684 after a high of $4,701.
This morning the base metals, with the exception of tin that is up 0.7 percent, have retreated, they are down across the board by an average of one percent, led by a 1.7 percent drop in zinc to $1,752, while lead is off 0.9 percent at $1,708.50. Copper is down one percent at $4,636. The markets seem to have been pushed back on concerns about China’s markets after the PBoC weakened the yuan’s fixing levels, which halted the relief rally that had been underway.
In Shanghai, the metals are mixed, lead and zinc are down 1.2 and 0.2 percent respectively, tin at the other extreme is up 3.3 percent, nickel is up 1.3 percent, aluminium is up 0.1 percent and copper is up 0.3 percent at Rmb 36,170. Spot copper in Changjiang is up 0.1 percent, the spread with the April contract is at an equivalent of $18 per tonne contango, while the LME/Shanghai copper arb is around 7.80.
In other markets in China, iron ore prices continue to rise, they were up 3 percent yesterday at $51.52 and the Dalian Exchange price is up a further 2 percent today. Steel rebar is off 0.4 percent, gold dipped 0.6 percent and silver slipped 0.4 percent. In international markets, Brent crude is off 1.4 percent at $34.15.
Equities shrugged off poor PMI data, the Euro Stoxx 50 closed up 2.2 percent and the Dow closed up 1.4 percent, but Asia has not followed suit, with the Nikkei off 0.4 percent, the Hang Seng is little changed, the ASX200 is off 0.4 percent, the Kospi is down 0.1 percent and the CSI 300 is down 1.5 percent.
In FX – the dollar index is firmer again at 97.27, the euro is weaker at 1.1038, sterling fell to 1.4057 yesterday, last at 1.4107, euro-sterling is at 0.7825, while the aussie and yen are firmer at 0.7232 and 112.18. Emerging market currencies are mixed, the yuan is weaker at 6.5340, as are the rupee at 68.67 and the ringgit, while the rupiah, real, rand and rouble are firmer.
The economic agenda starts with German GDP and Ifo business climate, followed by UK inflation report hearings, US house price index, consumer confidence, existing homes sales and Richmond manufacturing data. UK’s Monetary Policy Committee Andrew Haldane is speaking and later this evening there is data on Japan’s services PPI – see table below.
The run up in base metals has run into resistance with copper doing so just ahead of an inverse head and shoulder neckline on the charts. Aluminium and zinc punched up through resistance, while tin and nickel were close to doing so, but lead continued to buck the trend as prices come under further pressure. For now, these pull-backs seem to be consolidation, indeed aluminium is already finding some buying with prices just a few dollars away from yesterday’s multi-month highs. As such, as long as the broader markets do not suffer too much follow through weakness as Europe opens, then the dips in the base metals may well be short-lived.
Gold prices pushed higher overnight, suggesting increased nervousness again, prices have been as high as $1,222.90, but are drifting lower again, last at $1,216. Silver and platinum have followed gold, while palladium had remained weak as it continues to drift. On balance, we expect more consolidation in gold, but this morning blip higher suggests it is ready to act as a safe-haven at short notice.
