Gold consolidates after Friday’s weakness, PGMs look particularly weak

Otmane El Rhazi from The Bullion Desk.

Precious metals consolidated ahead of the US employment report, but a better than expected number sent prices lower as it made a Fed rate rise more likely – this led to most of the precious metals breaking important support levels and platinum matching the March low at $1,088. Gold broke support at $1,170 to put in a low at $1,162,60 and silver dropped below $16 to $15.98.

The base metals moved lower on Friday and at the day’s lows prices were down an average of 1.1 percent that saw aluminium set a fresh low at $1,726 and copper put in a low at $5,885, but a good US employment report boosted confidence and helped some recover earlier losses by the close. Lead and tin were the main exceptions, they closed down 1.1 and 0.8 percent respectively, while copper closed up 0.4 percent at $5,941.50.

This morning the base metals are little changed with metals either unchanged or up slightly with lead up 0.2 percent and nickel and copper up 0.3 percent with the latter at $5,961. Volume has been extremely low with just 1,735 lots traded with volume in nickel again relatively high.

Precious metals are firmer with platinum up 0.3 percent at $1,096.80, while the rest are little changed with gold at $1,173.20.

In Shanghai, the base metals are mixed with aluminium, lead, tin and zinc lower by 0.6, 0.4, 0.2 and 0.1 percent respectively, while nickel is up 0.7 percent and copper is up 0.3 percent at Rmb 43,160. Spot copper in Changjiang is up 0.6 percent at Rmb 43,350-43,450, the spread with the August futures is at an equivalent of $47 per tonnes and the LME/Shanghai copper arb ratio is at 1 to 7.24. Lower Chinese copper imports may start to underin Shanghia prices.

With the LME copper arb window closed, copper imports have fallen, they were down 16.3 percent in May compared with April and year to date imports are down 12.5 percent. Unwrought aluminium and product exports were off 4.7 percent in May compared with April, but year to date exports are up 35.4 percent at 2.06 million tonnes. So the earlier high all-in price has boosted exports, but the weaker all-in price more recently seems to be only having a limited impact on curbing exports – but it might still e early days for the impact to be felt.

Precious metals in Shanghai are weaker with silver down 0.5 percent and gold off 0.1 percent.

Equities – concerns over Greece saw the Euro Stoxx 50 fall 1.3 percent on Friday and the Dow was off 0.3 percent even though the employment report was stronger than expected. Asia this morning is mixed with the Nikkei off 0.1 percent, the Hang Seng is up 0.4 percent, the CSI is up 1.4 percent and the Kospi is down 0.1 percent.

Currencies – the dollar index is mid-range at 96.36, the euro has pulled back from its recent rebound, last at 1.1110, sterling is last at 1.5273, the yen remains weak at 125.55, as is the aussie at 0.7615, the rouble is at 55.70 and the yuan is at 6.2055. Emerging market currencies are looking weaker too with the rupiah setting fresh multi-year lows at 13,385, as is the rand at 12.6250 (which may well be why platinum is as weak as it is), the rupee is at 64.15, while the recent rate rise in Brazil seems to have prevented the real from further weakening – it is below recent lows, last at 3.1374.

Data out already showed Japan’s GDP climb one percent, which was up from the 0.7 percent expected and GDP price index was 3.4 percent. China’s trade balance climbed to $59.5 billion (Rmb 366.8 billion), up from $34.1 billion. Exports dropped 2.8 percent compared with a year ago and imports declined 18.1 percent. The lower exports and imports highlight the weakness in the economy. Data out later includes German industrial production and trade balance, EU Sentix investor confidence index and US labour market conditions – see table below for more details.

For the most part the base metals are under pressure as the recent sell-offs continue – there is some evidence of buying emerging, copper got some lift on Friday, but it is only nickel that is looking bullish as prices have started to trend higher over the past six days or so – we feel the potential for tightness in China is driving that. For the rest, we expect further consolidation, with those still above recent lows the ones that may still have further to fall – notably zinc, lead and copper.

The precious metals spiked lower on Friday after the US data, the PGMs look particularly weak with platinum once again looking oversold – platinum’s discount to gold is at $73. Silver is approaching support from its support line, while gold prices are some $20 above its support line – these are the lines linking the November and March lows. We expect scale down buying across the precious metals to provide support.

 

Overnight Performance
BST	06:52	+/-	+/- %	Lots
Cu	5961	19.5	0.3%	745
Al	1749.5	-0.5	0.0%	233
Ni	13145	45	0.3%	409
Zn	2140	0.5	0.0%	267
Pb	1912	4.5	0.2%	81
Sn	15300	0	0.0%
Steel	300	0	0.0%	Total
	Average (BM ex-Steel)		0.2%	1,735
Gold	1173.2	1.3	0.1%
Silver	16.11	0.02	0.1%
Platinum	1096.8	2.8	0.3%
Palladium	749	-1	-0.1%
	Average PM		0.1%

 

SHFE Prices 06:56 BST		Change	% Change
Cu	43160	120	0.3%
AL	12980	-75	-0.6%
Zn	16290	-20	-0.1%
Pb	13100	-55	-0.4%
Ni	99490	670	0.7%
Sn	114380	-190	-0.2%
Average change (base metals)			-0.1%
Rebar	2336	-5	-0.2%
Au	237.8	-0.35	-0.1%
Ag	3565	-19	-0.5%

 

Economic Agenda
BST	Country	Data	ACTUAL	Expected	Previous
12:50am	Japan	Current Account	1.27T	1.45T	2.07T
12:50am	Japan	Final GDP q/q	1.0%	0.7%	0.6%
12:50am	Japan	Bank Lending y/y	2.6%		2.6%
12:50am	Japan	Final GDP Price Index y/y	3.4%	3.4%	3.4%
3:25am	China	Trade Balance	59.5B	44.9B	34.1B
6:00am	Japan	Economy Watchers Sentiment	53.3	54.2	53.6
7:00am	Germany	German Industrial Production m/m		0.6%	-0.5%
7:00am	Germany	German Trade Balance		18.1B	19.3B
9:30am	EU	Sentix Investor Confidence		18.9	19.6
Day 2	ALL	G7 Meetings
3:00pm	US	Labor Market Conditions Index m/m			-1.9

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