Gold and silver prices rallied strongly on Wednesday after poor US data made it look more as though the first quarter poor economic performance was more than just a blip. This may mean the Fed stays on hold for longer, something we have thought likely for some time now. In turn, this makes it more likely that the market continues to react as though the strength of the dollar over the past year may have run ahead of the fundamentals. The move above $1,215 on the gold price looks constructive, the precious metals closed up an average of 1.6 percent yesterday with silver up 3.6 percent to $17.11 and palladium lagging with a 0.3 percent decline to $783. Gold reached a high of $1,219.50.
The base metals failed to react positively to the weaker dollar as poor economic data weighed on sentiment about likely demand growth. Nickel and lead were particularly hard hit, closing down 2.1 and 1.5 percent respectively, while copper was the only one not to suffer, it closed up 0.1 percent at $6,425.
This morning the precious metals are consolidating with the gold and silver prices off just 0.1 percent with gold at $1,213.30, silver at $17.0 and the PGMs up an average of 0.3 percent.
The base metals continue to consolidate with aluminium and lead up 0.5 and 0.4 percent, while the rest are little changed with copper off 0.2 percent at $6,415 – volume remains light with 2,078 lots traded as of 06:28 BST – see table below for more details.
In Shanghai, the July base metals contracts are down an average of 0.9 percent led by a 3.1 percent fall in nickel, this suggests the squeeze on the July shorts may be easing. Tin is down one percent, while the rest are off an average of 0.3 percent with copper at Rmb 45,930.
Spot copper in Changjiang is down 0.2 percent at Rmb 46,000-46,120, the backwardation with the futures is at an equivalent of $30/tonne and the LME/Shanghai copper arb ratio is last at 1 to 7.18, meaning the arbitrage window remains firmly closed.
Gold and silver prices in Shanghai are up 1.4 and 2.2 percent respectively.
Equities – remained under pressure yesterday as did government bonds with the Euro Stoxx 50 off 0.6 percent, the Dow closed off marginally. This morning in Asia the markets are mixed – the Nikkei is off one percent, the Hang Seng is up 0.1 percent, the CSI 300 is down 0.5 percent and the Kospi is up 0.4 percent.
Currencies – the dollar index extended lower yesterday dropping to 93.45, the previous low being 93.88 so the downward trend in the dollar continues as poor US data weighs on sentiment. Conversely the euro is trying higher, last at 1.1373, the recent high being 1.1391, sterling is strong at 1.5755, as are the aussie at 0.8120, the rouble at 49.26, while the yen is at 119.14 and the yuan is at 6.2016.
The economic agenda is focused on the US with much of Europe closed for Ascension Day, with US data including: PPI, initial jobless claims, natural gas storage and there is also a 30 year bond auction, which might well be interesting given the movement in bonds of late – see table below for more details.
Gold and silver prices have once again jumped higher and the weaker dollar and concerns over Greece seem to be driving that, we wait to see if this rally stalls like many of the earlier ones have. Our overall view is that bullion prices may be able to climb as we think corrections in other markets, notably equities and bonds, could well prompt investors to look for a safe-haven and gold may well offer that for a while.
The base metals are in consolidation mode, most metals have pulled back from recent highs and are now fairly quiet, waiting for direction. The weaker dollar is providing some support, there also seems to be dip buying given recent strength, but our view is that the earlier rallies may well have run ahead of the fundamentals so we would be wary of chasing prices higher from here and would not be surprised to see some further consolidation/correction.
| Overnight Performance | ||||
| BST | 06:28 | +/- | +/- % | Lots |
| Cu | 6415 | -10.5 | -0.2% | 647 |
| Al | 1893.5 | 8.5 | 0.5% | 293 |
| Ni | 13990 | -10 | -0.1% | 782 |
| Zn | 2340 | 2 | 0.1% | 287 |
| Pb | 2035.5 | 8 | 0.4% | 65 |
| Sn | 15800 | 0 | 0.0% | 4 |
| Steel | 395 | 0 | 0.0% | Total |
| Average (BM ex-Steel) | 0.1% | 2,078 | ||
| Gold | 1213.3 | -1.4 | -0.1% | |
| Silver | 17.09 | -0.02 | -0.1% | |
| Platinum | 1148 | 3 | 0.3% | |
| Palladium | 784.6 | 1.6 | 0.2% | |
| Average PM | 0.1% | |||
| SHFE Prices 06:38 BST | Price | Change | % Change |
| Cu | 45930 | -150 | -0.3% |
| AL | 13315 | -45 | -0.3% |
| Zn | 16950 | -90 | -0.5% |
| Pb | 13495 | 5 | 0.0% |
| Ni | 108730 | -3460 | -3.1% |
| Sn | 119370 | -1210 | -1.0% |
| Average change (base metals) | -0.9% | ||
| Rebar | 2258 | -10 | -0.4% |
| Au | 243.95 | 3.45 | 1.4% |
| Ag | 3666 | 80 | 2.2% |
| Economic Agenda | |||||
| BST | Country | Data | ACTUAL | Expected | Previous |
| 12:01am | UK | RICS House Price Balance | 33.0% | 22.0% | 22.0% |
| 12:50am | Japan | M2 Money Stock y/y | 3.6% | 3.6% | 3.6% |
| 4:45am | Japan | 30-y Bond Auction | 1.51|2.7 | 1.38|2.9 | |
| All Day | France | French Bank Holiday | |||
| 7:00am | Japan | Prelim Machine Tool Orders y/y | 14.9% | ||
| All Day | Germany | German Bank Holiday | |||
| 1:30pm | US | PPI m/m | 0.1% | 0.2% | |
| 1:30pm | US | Unemployment Claims | 272K | 265K | |
| 1:30pm | US | Core PPI m/m | 0.1% | 0.2% | |
| 3:30pm | US | Natural Gas Storage | 112B | 76B | |
| 6:01pm | US | 30-y Bond Auction | 2.60|2.2 | ||
The post Gold and silver prices rally as dollar retreats, base metals consolidate appeared first on The Bullion Desk.
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