Metals prices remain upbeat, upward momentum gathers pace

Base metals prices are firmer by an average 0.3% this morning, January 11, with three-month copper prices leading with a 0.6% gain to $5,778 per tonne, aluminium prices are up 0.5%, zinc prices are up 0.4 percent, nickel prices are up 0.2%, while the rest are little changed. Volume has been slightly below average with 4,120 lots traded as of 06:22 GMT. Precious metals prices are also firmer this morning with gains ranged between 0.2% for spot gold prices, which are at $1,189.10 per oz and 0.8% for palladium prices at $765 per oz.

These gains built on yesterday January 10’s stronger performance when base metals prices closed up an average of 1.7%, where lead and copper led the advance with gains of 3.7% and 2.8% respectively. Precious metals prices were mixed yesterday with silver prices the main gainers, they were up 1.2% at $16.77 per oz, spot gold prices were up 0.3%, while the PGMs were little changed.

In Shanghai this morning, the base metals are for the most part up, with average price gains of 1.2%, led by a 2.6% rise in March copper prices to Rmb 46,960 per tonne, aluminium prices are up 1.9%, lead and zinc prices are up 1.3%, nickel prices are up 0.9%, while tin is bucking the trend with a 0.6% decline. Spot copper prices in Changjiang are also up 2.6% at Rmb 46,690-46,890 per tonne – the forward copper curve remains in a contango, while the LME/Shanghai copper arb ratio is at 8.14.

In other metals in China, May iron ore prices on the Dalian Commodity Exchange (DCE) are up 3.7%, on SHFE steel rebar is up 2.2%, silver prices are up 0.8% and gold prices are up 0.2%. In international markets, spot Brent crude prices are up 0.1% at $53.69 per barrel having weakened recently on the back of concerns of a US producer response to the higher prices.

Equities were under light pressure yesterday with the Euro Stoxx 50 and Dow closing down 0.1% and 0.2% on January 10, in Asia this morning the mood is more upbeat with the Nikkei up 0.3%, the Hang Seng is up 0.8%, the ASX 200 is up 0.2%, the Kospi is up 1.5%, while the CSI 300 is bucking the trend with a 0.4% fall.

In FX, the dollar index is consolidating around 102.80 – the recent range has been 103.82 to 101.30. The euro is also consolidating off recent lows, recently quoted at 1.0560, the yen is at 116.00, sterling is weak at 1.2160, while the aussie at 0.7380 is rising. The yuan is weaker at 6.9231 – after the PBoC intervention last week the yuan climbed to around the 6.7800, so it seems its path of least resistance is to the downside and that could raise friction with the new US administration, although at least the PBoC has been seen to be intervening. Emerging market currencies are for the most part firmer, which suggests little concern ahead of the US administration handover, it also reflects the stronger commodity markets, although the Mexican peso is weakening further, which does highlight stress about Donald Trump taking over the helm. Either before, or after the inauguration, we expect increased volatility in currencies, especially emerging market ones.

Economic data showed Japan’s leading indicators edged higher to 102.7%, it has been trending higher since May 2016 – later there is a host of UK industrial, construction and GDP data, plus Bank of England Governor Mark Carney is speaking at 2:15 pm GMT. US data includes crude oil inventories, but the focus is likely to be on president-elect Donald Trump’s press conference at 4pm GMT, FOMC member Willian Dudley is then speaking at 6:20 pm GMT – see table below for more details.

Base metals prices are looking stronger as their new year rallies extend – given better economic data, especially yesterday’s Chinese PPI data, it is not surprising that prices are rallying as traders position themselves as the new year gets underway. Fundamentally we like the metals’ outlooks, but we are wary that the political scene may now heat-up as president-elect Donald Trump takes the helm so we should be braced for some pick-up in volatility – we may get a hint at what is to come this afternoon when he holds a press conference.  For now we would run with the upward momentum, but be ready for some turbulence.

The run up in gold prices seems to be on the back of two issues – a pick-up in inflationary expectations and a pick-up in some safe-haven buying ahead of the changeover in the US administration.  Silver and platinum are following, while palladium has been seeing independent strength. 

 

Overnight Performance
GMT	06:22	+/-	+/- %	Lots
Cu	5778	33	0.6%	1614
Al	1750	9.5	0.5%	669
Ni	10555	20	0.2%	789
Zn	2720	12	0.4%	780
Pb	2181	-1	0.0%	248
Sn	21150	0	0.0%	20
	Average		0.3%	4,120
Gold	1189.1	2.95	0.2%
Silver	16.832	0.067	0.4%
Platinum	979.5	6.5	0.7%
Palladium	765	6	0.8%
	Average PM		0.5%

 

SHFE Prices 06:22 GMT	RMB	Change	% Change
Cu	46960	1180	2.6%
AL	12930	235	1.9%
Zn	22425	295	1.3%
Pb	18700	235	1.3%
Ni	87540	770	0.9%
Sn	153160	-910	-0.6%
Average change (base metals)	0		1.2%
Rebar	3162	67	2.2%
Iron ore	601.5	21.5	3.7%
Au	271.65	0.5	0.2%
Ag	4159	32	0.8%

 

Economic Agenda
GMT	Country	Data	Actual	Expected	Previous
3:45am	Japan	30-y Bond Auction	0.75|3.3		0.62|2.9
5:00am	Japan	Leading Indicators	102.7%	102.6%	100.8%
9:30am	UK	Manufacturing Production m/m		0.5%	-0.9%
9:30am	UK	Goods Trade Balance		-11.2B	-9.7B
9:30am	UK	Construction Output m/m		0.3%	-0.6%
9:30am	UK	Industrial Production m/m		0.9%	-1.3%
2:15pm	UK	BOE Gov Carney Speaks
3:00pm	UK	NIESR GDP Estimate			0.4%
3:30pm	US	Crude Oil Inventories		0.9M	-7.1M
4:00pm	US	President-Elect Trump Speaks
6:20pm	US	FOMC Member Dudley Speaks

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