The base metals put in a strong performance on Monday, they started European trading up an average of 0.6 percent and closed the day up 1.7 percent, with a 2.8 percent gain in tin, 2.4 percent gain in zinc and 1.5 percent in nickel and lead. Copper was up 1.2 percent at $6,096 and aluminium was the laggard with a 0.7 percent gain to $1,834. A weaker dollar and follow through dip buying on the likes of copper and aluminium, rebound buying in nickel and tin and continued buying in lead and zinc – all led to the stronger tone.
Precious metals started Monday from a low opening, but then rallied to close with gains of 2.1 percent on average, with silver up 4.1 percent to $16.36– the pull-back in the dollar on the back of weak US PMI services data, seems to have mustered support.
This morning the base metals are down an average of 0.3 percent, led by a 0.7 percent pull-back in nickel and a 0.6 percent drop in copper at $6,062. Lead and zinc are down around 0.3 percent, while aluminium and tin are up 0.1 percent. Volume remains light at 3,421 lots. Given yesterday’s gains we see this as consolidation.
Precious metals this morning are off 0.1 percent on average with all metals little changed – gold is last at $1,199.90.
In Shanghai, the base metals contracts are up 0.5 percent, with nickel up 1.8 percent, zinc up 1.1 percent, tin up 0.4 percent, aluminium off 0.3 percent while lead and copper are little changed with copper at Rmb 43,790. Steel rebar is up 0.3 percent, while iron ore is experiencing a restocking rally with prices last at $58.70, up from a 10-year low of $46.70 earlier in the month.
Spot copper in Changjiang is unchanged at Rmb 44,000-44,200, the backwardation with the futures is at an equivalent of around $66 per tonne and the LME/Shanghai copper arb ratio is at 1 to 7.22, meaning the arb window remains closed.
Bullion prices in Shanghai have rallied strongly today in response to the rebound yesterday with silver up 3.6 percent and gold up 1.9 percent.
Equities were mixed yesterday with the Euro Stoxx 50 up 1.6 percent, while poor US data saw the Dow close down 0.2 percent. Asia is also mixed with the Nikkei up 0.4 percent, the Hang Seng is off 0.3 percent, the CSI 300 is down 1.4 percent and the Kospi is off 0.5 percent. Given record setting equities in recent weeks some profit-taking seems inevitable and the global markets are likely to be as nervous as US markets are ahead of tomorrow’s FOMC statement.
Currencies are focused on the dollar’s weakness that saw the dollar index drop to 96.46, the lowest since early April – the recent lowest the index has been is 96.16 so any move down below there would suggest the dollar has rolled over to the downside – something we have been expecting for a while now. Tomorrow’s US advance GDP data and the FOMC statement are likely to decide the near term fate of the dollar. The euro is last at 1.0878, sterling is firm at 1.5234, as is the aussie at 0.7874, the yen is flat at 119.11, the rouble is slightly weaker at 51.38 and the yuan is at 6.2071.
The economic agenda today showed poor Japanese retails sales that fell 9.7 percent, UK GDP, mortgage approvals and index of services data is out at 9:30 am and US data includes a house price index, consumer confidence data and Richmond manufacturing index – see table below for more details.
All the base metals have had a few days of strength and are now consolidating. The rebounds suggest the lower levels of late have met with scale down buying and the rebounds have prompted short-covering. The likes of lead and zinc have been climbing for over a month now and have seen rebounds turn into outright rallies with gains of 25.7 and 16.8 percent respectively. Whether the others can follow to the same extent remains to be see – some metals have better outlooks than others, but short-covering combined with a weaker dollar could provide a lot of fuel. Ee look forward to seeing what today’s LME COTR data says about recent position changes.
The precious metals have been under pressure, but we have expected scale down buying/underlying support and that seems to have been found now with yesterday’s strong rebounds – the rebounds were slow in coming considering the weaker dollar, but if the dollar breaks support then we would expect that to underpin rallies further.
| Overnight Performance | ||||
| BST | 06:03 | +/- | +/- % | Lots |
| Cu | 6062 | -34.5 | -0.6% | 1589 |
| Al | 1835 | 1 | 0.1% | 368 |
| Ni | 13360 | -100 | -0.7% | 771 |
| Zn | 2291.5 | -7 | -0.3% | 548 |
| Pb | 2096 | -8 | -0.4% | 135 |
| Sn | 16200 | 10 | 0.1% | 10 |
| Steel | 395 | 0 | 0.0% | Total |
| Average (BM ex-Steel) | -0.3% | 3,421 | ||
| Gold | 1199.9 | -1.6 | -0.1% | |
| Silver | 16.33 | -0.03 | -0.2% | |
| Platinum | 1141.5 | 0.5 | 0.0% | |
| Palladium | 774.5 | -0.5 | -0.1% | |
| Average PM | -0.1% | |||
| SHFE prices 06:04 BST | Change | % Change | |
| Cu | 43790 | 30 | 0.1% |
| AL | 13295 | -35 | -0.3% |
| Zn | 16905 | 190 | 1.1% |
| Pb | 13720 | 0 | 0.0% |
| Ni | 101870 | 1780 | 1.8% |
| Sn | 117040 | 510 | 0.4% |
| Average change (base metals) | 0.5% | ||
| Rebar | 2309 | 7 | 0.3% |
| Au | 240.9 | 4.4 | 1.9% |
| Ag | 3582 | 126 | 3.6% |
| Economic Agenda | |||||
| BST | Country | Data | ACTUAL | Expected | Previous |
| 12:50am | Japan | Retail Sales y/y | -9.7% | -7.4% | -1.7% |
| 9:30am | UK | Prelim GDP q/q | 0.5% | 0.6% | |
| 9:30am | UK | BBA Mortgage Approvals | 37.9K | 37.3K | |
| 9:30am | UK | Index of Services 3m/3m | 0.7% | 0.8% | |
| 2:00pm | US | S&P/CS Composite-20 HPI y/y | 4.7% | 4.6% | |
| 3:00pm | US | CB Consumer Confidence | 102.6 | 101.3 | |
| 3:00pm | US | Richmond Manufacturing Index | -2 | -8 |
The post Metals’ rallies pause, but dollar weakness looms appeared first on The Bullion Desk.
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