Metals’ price rallies run into selling

The base metals are for the most part weaker apart from zinc this morning, Thursday September 7, with prices down an average of 0.3%. This halt in the upward momentum may well signal the rallies have run their course for now.

Three-month aluminium prices lead on the downside with a 0.5% fall to $2,104.50 per tonne, while copper prices are down 0.3% at $6,902 per tonne. Volumes across the board has been below average with 4,321 lots traded as of 06:33 BST.

This follows a day of price rebounds on Wednesday, when prices closed up an average of 0.9% after Tuesday’s 1.8% average fall.

Gold and silver prices are slightly firmer with gold prices up 0.1% at $1,335.33 per oz, while silver is little changed at $17.944 per oz. The PGMs are firmer, up either side of 0.4%. This comes after a general day of weakness on Wednesday when the complex closed down an average of 1%.

In China, the Shanghai Futures Exchange (SHFE) metals prices are mixed this morning: aluminium, zinc and tin prices are down an average of 0.7%, while nickel prices are up 1% and lead and copper prices are unchanged with copper for November delivery at 53,220 yuan ($8,374) per tonne.

Spot copper prices in Changjiang are up 0.2% at 53,020-53,150 yuan per tonne and the London/Shanghai copper arb ratio is unchanged at 7.71.

Other metals in China are showing weakness with steel rebar prices on the SHFE down 1.8%, while gold prices are off 0.3%, silver prices are down 0.4% and iron ore prices for January delivery are off 2.5% at 553 yuan per tonne on the Dalian Commodity Exchange.

In international markets, spot Brent crude oil prices are down 0.24% at $54.02 per barrel and the yield on US ten-year treasuries has firmed to 2.09%, as did the German ten-year bund yield, which was recently quoted at 0.35%. Some agreement in Congress over extending the debt ceiling having helped sentiment in US markets.

Equities in Asia are mixed this morning: the Kospi has managed to rebound 1.2%, the Nikkei is up 0.1%, while the Hang Seng is off 0.2%, the ASX 200 is off 0.1% and the CSI 300 is little changed. US markets closed firmer yesterday, with the Dow up 0.25% at 21,807.64 and in Europe, the Euro Stoxx 50 closed up 0.38% at 3,433.80.

The dollar index, at 92.20, is once again slightly weaker and the euro at 1.1918 is consolidating in high ground as the market awaits today’s ECB press conference. Sterling is firm at 1.3040, as is the yen at 109.08, while the Australian dollar at 0.7979 is also consolidating after recent strength.

The Chinese yuan, at 6.5366, is strong: it has been rising sharply in recent months – the strength suggests confidence in the economy. Other emerging market currencies are also strengthening, especially the ringgit at 4.2150 and the real at 3.0974, which again suggests a degree of confidence and not too much concern over North Korea.

Data out already today showed Japan’s leading indicators slip to 105% from 105.9% and German industrial production was flat, but that was up from the previous reading of -1.1%, although worse than the 0.5% expected.

Data out later includes France’s trade balance, UK house prices, EU revised GDP, the ECB rate decision and press conference, with US data including initial jobless claims, revised nonfarm productivity, revised unit labor costs, IBD/TIPP economic optimism, natural gas storage and crude oil inventories.

More of the base metals rallies – notably copper’s and nickel’s – ran out of steam on Tuesday and given the gains in recent weeks/months, it is not surprising that more selling is being done at these higher price levels. With some signs of price weakness appearing, more profit-taking may emerge and a deeper pullback may follow. We wait to see how well supported the metals are – some dip buying has already been seen, as per yesterday’s performance, but we would not be surprised to see more weakness emerge in the short term. We do, however, remain bullish of the fundamentals, but just feel prices may have run ahead of the fundamentals for now.

Geopolitical events have boosted precious metals prices, with gold and silver prices gapping higher on Monday – they are holding on to most of their gains but have not seen follow through strength so far, so there is a risk of a pullback, especially if other markets pullback too. That said, dips are likely to be well supported given North Korea is showing no sign of retreat. The PGMs may also consolidate at lower numbers.

 

Overnight Performance
BST	06:33	+/-	+/- %	Lots
Cu	6902	-21	-0.3%	1466
Al	2104.5	-10.5	-0.5%	947
Ni	12230	-20	-0.2%	978
Zn	3106.5	1	0.0%	882
Pb	2342	-10.5	-0.4%	24
Sn	20740	-45	-0.2%	24
	Average		-0.3%	4,321
Gold	1335.33	1.73	0.1%
Silver	17.844	0.004	0.0%
Platinum	1003.3	3.3	0.3%
Palladium	942.4	4.4	0.5%
	Average PM		0.2%

SHFE Prices 06:33 BST	RMB	Change	% Change
Cu	53220	0	0.0%
AL	16370	-75	-0.5%
Zn	25205	-195	-0.8%
Pb	19100	0	0.0%
Ni	96350	990	1.0%
Sn	145150	-1100	-0.8%
Average change (base metals)			-0.2%
Rebar	3984	-71	-1.8%
Au	283	-0.75	-0.3%
Ag	4041	-17	-0.4%
Iron Ore (DCE) Jan’18	553	-14	-2.5%

Economic Agenda
BST	Country	Data	Actual	Expected	Previous
6:00am	Japan	Leading Indicators	105.0%	105.1%	105.9%
7:00am	Germany	German Industrial Production m/m	0.0%	0.5%	-1.1%
7:45am	France	French Trade Balance		-4.5B	-4.7B
8:30am	UK	Halifax HPI m/m		0.2%	0.4%
10:00am	EU	Revised GDP q/q		0.6%	0.6%
12:45pm	EU	Minimum Bid Rate		0.0%	0.0%
1:30pm	EU	ECB Press Conference
1:30pm	US	Initial Jobless Claims		245K	236K
1:30pm	US	Revised Nonfarm Productivity q/q		1.3%	0.9%
1:30pm	US	Revised Unit Labor Costs q/q		0.3%	0.6%
3:00pm	US	IBD/TIPP Economic Optimism		53.1	52.2
3:30pm	US	Natural Gas Storage		63B	30B
4:00pm	US	Crude Oil Inventories		4.1M	-5.4M

 

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