Gold Bulls Need A Break Above 1276 And A Close Above 1273

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Metals consolidate recent gains but look stronger overall

After Tuesday’s gains the base metals price for the most part consolidated yesterday, October 26 although copper and tin prices did extend their gains slightly. All held up relatively well though, with three-month prices closing with average gains of 0.2 percent. Precious metals consolidated in lower ground yesterday, with spot prices down an average of one percent, led by a 2.2 percent fall in palladium prices to $618 per oz, silver prices were down 0.9 percent at $17.59 per oz, platinum prices were little changed, while gold prices closed off 0.6 percent at $1,265.80 per oz.

This morning the base metals have pulled back further with three-month prices down an average of 0.5 percent, zinc prices are off 0.1 percent, while the rest are off between 0.4 percent for aluminium and lead and 0.7 percent for tin. Copper prices were down 0.6 percent at $4,728 per tonne – volume on the LME has been below average with 3,451 lots traded as of 06:50 BST.

The precious metals are, however, firmer, with spot prices up an average of 0.3 percent this morning, ranged between a 0.1 percent rise in silver and 0.5 percent in platinum, gold prices were recently quoted at $1,268.20 per oz.

In Shanghai, base metals prices are down across the board by an average of 0.9 percent, led by a two percent drop in aluminium, which has been one of the strongest metals of late due to transport disruptions in China. Nickel and tin prices are down 0.9 percent, zinc prices are off 0.7 percent, while lead and copper prices are off 0.3 and 0.5 percent respectively, with December copper prices at Rmb 37,750 per tonne. Spot copper in Changjiang is off 0.4 percent to Rmb 37,990-38,110, the backwardation between spot and the December contracts is at an equivalent of $52 per tonne, while the LME/Shanghai copper arb ratio has slipped slightly to 7.99, but arbitrage opportunities should still exist for some types of trade, this should help support LME copper prices.

In other metals in China, January iron ore prices on the Dalian Commodity Exchange are little changed, imported iron ore prices were recently trading as high as $63 per tonne, January steel rebar prices on SHFE are off 1.9 percent and gold and silver prices are off an average of 0.5 percent. In international markets, spot Brent crude prices are up 0.4 percent at $50.13 per barrel.

European equities were slightly weaker yesterday with the Euro Stoxx 50 closed down 0.2 percent but the Dow was up 0.2 percent. In Asia this morning, the equities we routinely follow are weaker with losses of between 0.3 percent for the Nikkei and 1.2 percent for the ASX 200, the exception has been the Kospi that is up 0.6 percent.

In FX, the dollar index is consolidating in high ground, recently quoted at 98.63, the euro is edging higher, last at 1.0911, sterling and the aussie are flat at 1.2219 and 0.7633 and the yen is weaker at 104.60. In Emerging market (EM) currencies the yuan remains weak at 6.7754 and the others we routinely follow are on a back footing again – the persistent weakness in the yuan may well be worrying other EM currencies.

The economic calendar is busy today with Spanish unemployment, EU M3 money supply and private loans, UK GDP, index of services and realised sales, with US data including durable goods orders, initial jobless claims, pending home sales and natural gas storage – see table below.

Base metals prices have rebounded strongly this week but prices are now consolidating and are generally holding up well. The former overhead resistance levels are, however, not that far away so there may be more selling to be absorbed for a while. So far, only tin has pushed higher into new high ground for the year, but it is facing considerable stock shortages. We would expect more sideways to higher trading for most of the base metals – the market is now likely to focus on Chinese PMI data out on Tuesday and well as what developments are seen during next week’s London Metals Week.

Precious metals prices are still consolidating after the early October sell-off, prices have started to edge higher in recent days and considering the stronger dollar that is an achievement. There does not seem to be as much buying interest in the precious metals as there has been in the base metals. A stronger economic outlook may well mean less demand for safe-havens, but we would expect the more industrial precious metals to do relatively better than gold in this climate. 

 

Overnight Performance
BST	06:50	+/-	+/- %	Lots
Cu	4728	-29	-0.6%	1089
Al	1675	-7	-0.4%	1043
Ni	10165	-60	-0.6%	672
Zn	2342	-1.5	-0.1%	462
Pb	2058	-9	-0.4%	178
Sn	20295	-135	-0.7%	7
	Average		-0.5%	3,451
Gold	1268.19	2.39	0.2%
Silver	17.596	0.011	0.1%
Platinum	963.8	4.8	0.5%
Palladium	620.5	2.5	0.4%
	Average PM		0.3%

 

SHFE Prices 06:51 BST	RMB	Change	% Change
Cu	37750	-180	-0.5%
AL	13425	-275	-2.0%
Zn	18760	-125	-0.7%
Pb	16250	-55	-0.3%
Ni	80690	-740	-0.9%
Sn	132890	-1230	-0.9%
Average change (base metals)	0		-0.9%
Rebar	2497	-49	-1.9%
Au	277.8	-1.25	-0.4%
Ag	4049	-23	-0.6%

 

Economic Agenda
BST	Country	Data	Actual	Expected	Previous
8:00am	Spain	Unemployment Rate		19.3%	20.0%
9:00am	EU	M3 Money Supply y/y		5.1%	5.1%
9:00am	EU	Private Loans y/y		1.9%	1.8%
9:30am	UK	Prelim GDP q/q		0.3%	0.7%
9:30am	UK	Index of Services 3m/3m		0.8%	0.6%
11:00am	UK	CBI Realized Sales		-2	-8
1:30pm	US	Core Durable Goods Orders m/m		0.2%	-0.2%
1:30pm	US	Initial jobless claims		255k	260K
1:30pm	US	Durable Goods Orders m/m		0.1%	0.1%
3:00pm	US	Pending Home Sales m/m		1.2%	-2.4%
3:30pm	US	Natural Gas Storage		71B	77B

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Silver: Pending Break, Upside Preferred

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PLATINUM TODAY – Support finally found

Short Term: Medium Term: Long Term: Resistances: R1 966 20 DMA R2 970 DTL R3 1020 June 08 peak R4 1090 May peak R5 1195 High so far R6 1207 H&S target R7 1289 Jan ’15 peak Support: S1 966 20 DMA S2 957 61.8% Fibo (2016 rally) S3 954 June low S4 937 April low/HSL S5 923 Low so far S6 911 HSL S7 811 Jan low S8 807 Support 2004 S9 745 2008 low Stochastics:Rebounds Legend: Fibo = Fibonacci retracement level DMA = Daily moving average BB = Bollinger band (H)SL = (Horizontal) support line UTL = Up trend line H&S = Head-and-shoulder pattern Technical Comment Analysis The pullback in platinum prices was relentless between mid-August and mid-October. Spot prices have since found support around $926 per oz and in recent days have managed to rebound. The sell-off created an oversold situation, we feel; we expect prices to recover. The stochastics have turned higher. Macro factors With wage agreements apparently in place in South Africa’s platinum industry, the latest threat of strikes has passed. Last week we wondered if this was going to be a ‘sell the rumour, buy the fact’ situation. This seems that has been the case.  The funds’ gross long position had become very extended, peaking at 65,259 contracts on August 9. The previous peaks were around 55,000-59,000 contracts. The position was 48,218 contracts on October 18. The gross short position had fallen to a low of 9,310 contracts on August 9; it has since climbed to 26,781 contracts, having climbed 4,136 contracts last week. With prices pulling back $269 per oz from the high and back at levels seen in February, it looked as though the market fully discounted the likelihood of no strikes. Given the build-up in the gross short position, there may now be short-covering. Better economic data plus strong vehicle sales bode well for PGM demand. Platinum’s $308-per-oz discount to gold prices is also likely to make platinum jewellery look relatively attractive from a pricing perspective. Conclusion Prices have corrected more than we thought they would, especially with robust European car registrations and a market in deficit. The price correction made sense if strikes are unlikely but the extent of the pullback looks overdone.  Given how far prices have fallen, we would have thought that physical demand and investment demand would be hunting bargains. Given platinum’s price discount to the gold price and the oversold appearance, we would now look for prices to work higher. All trades or trading strategies mentioned in the report are hypothetical, for illustration only and do not constitute trading recommendations.

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Is Nickel Setting Up For A New Rally?

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Gold Holds Above Important Resistance At 1272/73

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The Winner Of The Election Is Likely To Be....Gold

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