Base metals quiet ahead of US employment report, gold prices weak

The base metals closed quite mixed on Thursday, October 6, with three-month copper and zinc prices off 0.8 percent with copper prices at $4,760 per tonne, while the rest of the metals were stronger with nickel prices up 1.7 percent at $10,260 per tonne, aluminium and tin prices were up 0.8 percent, with tin at $20,006 per tonne, while aluminium prices closed up 0.2 percent. In precious metals the slide continued with spot prices closing down an average of 1.6 percent on Thursday, led by a 2.5 percent drop in spot silver to $17.29 per ounce, PGM prices were off around 1.5 percent and gold prices closed off one percent at $1,255.60 per ounce.

This morning, the three-month base metals prices are little changed, copper and nickel prices are off 0.2 percent with copper prices at $4,752 per tonne, zinc prices are up 0.2 percent at $2,330 per tonne, while the rest are little changed. Volume has been the highest it has been all week, with 1,705 lots traded as of 06:27 BST.

Precious metals this morning remain under pressure with prices off 0.5 percent on average led by an average 0.7 percent drop in PGM prices, silver prices are off 0.3 percent at $17.29 per ounce and gold prices are off 0.2 percent at $1,252.48 per ounce.  Despite the drop in gold prices, ETF investor are not heading for the exits.

Equities were slightly weaker in Europe and the US on Thursday, October 6, with the Euro Stoxx 50 off 0.2 percent and the Dow closed off 0.1 percent and Asian equities are weaker this morning with the Nikkei down 0.4 percent, the Hang Seng and Kospi are off 0.5 percent and the ASX 200 is off 0.3 percent. The market seems to be preparing itself for a good US employment report and if that is the case, on top of the better recent data too, it may well make the market more hawkish about a Fed rate rise. According to Fed Fund futures the market puts a 14.5 percent chance of a November rise and a 55.1 percent chance of a December rise.

In FX, sterling stole the limelight this morning with its value dropping at least six percent at one stage to around 1.1800, some reports suggest the low was closer to 1.1400 before rebounding, it is last at 1.2460. The drop happened in thin trading conditions just after midnight. The dollar is stronger with the index at 96.98, the euro is weaker at 1.1122, the yen is weaker at 103.92, as is the aussie at 0.7577. The strength of the dollar and weakness in the currencies and gold prices suggest the market is preparing for a US rate rise and that could act as a drag on commodities for a while.

Today’s economic agenda is very busy, the focus will be on the US employment report, but ahead of that there has been some weaker data out of Japan, but a strong German industrial production number that climbed 2.5 percent. Data out later includes French industrial production and trade balance, UK goods trade balance and manufacturing and industrial production. Other US data includes final wholesale inventories and consumer credit. There are also four FOMC members speaking, see table below for more details. The IMF meeting continues today and runs through the weekend. China’s Caixin services PMI data is also set to be released on Saturday.

Tin and aluminium are the two metals holding up the most, while the other base metals are consolidating. A stronger dollar is acting as a headwind and the dollar may well strength further this afternoon if the US employment report is bullish. Better economic data should, however, boost the outlook for metal demand and that is constructive. When China closed up for its holiday last week, LME three-month copper prices were around $4,820, with prices now at $4,760, we will wait to see if the weaker prices are seen as an opportunity to bargain hunt, or not.

Precious metals look washed-out, especially platinum, but it looks like long liquidation continues in the other metals, which is not surprising given how extended the gross long fund positions had become.  The stronger dollar will be adding weight and that may well increase if the US jobs data is strong. Given a lot of uncertainty in the financial markets, especially ahead of a possible interest rate rise and the contagion that could producer, and with the US election not far away, we would not be surprised to see bargain hunting emerge before long.

 

Overnight Performance
BST	06:27	+/-	+/- %	Lots
Cu	4752	-8	-0.2%	759
Al	1678	1	0.1%	610
Ni	10240	-20	-0.2%	49
Zn	2330	4	0.2%	212
Pb	2063	1	0.0%	73
Sn	20090	5	0.0%	2
	Average		0.0%	1,705
Gold	1252.48	-3.12	-0.2%
Silver	17.29	-0.045	-0.3%
Platinum	958.6	-5.4	-0.6%
Palladium	659.4	-5.6	-0.8%
	Average PM		-0.5%

 

BST	Country	Data	Actual	Expected	Previous
All Day	China	Bank Holiday
1:00am	Japan	Average Cash Earnings y/y	-0.1%	0.5%	1.2%
6:00am	Japan	Leading Index	101.2%	101.7%	100.0%
7:00am	Germany	Industrial Output m/m	2.5%	0.8%	-1.5%
7:45am	France	Gov Budget Balance			-80.9B
7:45am	France	Industrial Production m/m		0.7%	-0.6%
7:45am	France	Trade Balance		-4.3B	-4.5B
8:30am	UK	Halifax HPI m/m		0.0%	-0.2%
9:30am	UK	Manufacturing Production m/m		0.5%	-0.9%
9:30am	UK	Goods Trade Balance		-11.1B	-11.8B
9:30am	UK	Industrial Production m/m		0.1%	0.1%
1:30pm	US	Average Hourly Earnings m/m		0.2%	0.1%
1:30pm	US	Non-Farm Employment Change		175K	151K
1:30pm	US	Unemployment Rate		4.9%	4.9%
3:00pm	US	Final Wholesale Inventories m/m		-0.1%	-0.1%
Day 1	ALL	IMF Meetings
3:30pm	US	FOMC Member Fischer Speaks
5:45pm	US	FOMC Member Mester Speaks
8:00pm	US	FOMC Member George Speaks
8:00pm	US	Consumer Credit m/m		16.8B	17.7B
9:00pm	US	FOMC Member Brainard Speaks

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