Precious metals started yesterday on a back footing, but the US opening changed that when prices rallied strongly, but they failed to hold on to gains and closed down an average of 0.2 percent, with gold price little changed at $1,188.50, having been up 1.2 percent at one stage, while the PGMs fell around 0.4 percent. What the catalyst was for the spike higher was unclear, but it was done in high volume – the fact gold failed to hold on to the gains will be of concern to the bulls. Gold traded a range between $1,184.70 to $1,204.50, while silver jumped from $16.61 to $17.18 but closed at $16.72.
The base metals had a choppy day of trading on Monday with average losses of minus one percent at the day’s lows and gains of 0.9 percent at the day’s highs – they closed little changed, but mixed with zinc off 1.4 percent, nickel up 2.9 percent and copper off 0.3 percent at $6,002.50 – having been as low as $5,985. Manufacturing PMIs for the most part were slightly better in May than in April, the main exception was Germany where it dropped to 51.1 from 51.4, US data was mixed, personal spending was flat, income was up 0.4 percent, manufacturing PMIs came in firmer and construction spending jumped an impressive 2.2 percent, having been expected to climb 0.7 percent. This suggests the poor first quarter US data may well have been significantly influenced by poor weather and a stronger pace of growth is unfolding in the second quarter.
This morning, the base metals are little changed, nickel is off 0.3 percent but it was yesterday’s top performer by a long shot, tin is unchanged, while the rest are up between 0.2 and 0.3 percent with copper up 0.2 percent at $6,014.50. Volume remains light at 3,576 lots traded.
Precious metals are little changed this morning with platinum up 0.2 percent at $1,102.80, silver is off 0.1 percent at $16.70 while the gold price is last at $1,188.10. Given yesterday’s gyrations the markets look vulnerable again as yesterday’s overhead tails on the candlesticks suggested sellers dominated.
In Shanghai, the base metals are mixed with zinc and copper lower by 0.9 and 0.6 percent, with copper at Rmb 43,540, aluminium and lead are little changed, while tin is up 0.2 percent and nickel has followed the LME nickel price higher with a 1.9 percent gain to Rmb 98,920.
Spot copper in Changjiang is off 0.3 percent at Rmb 43,750-43,850, the spread with the August future is at an equivalent of $50/tonne and the LME/Shanghai copper arb ratio is at 1 to 7.24 meaning the arb window is closed.
December gold in Shanghai is down 0.4 percent, while December silver is unchanged.
Equities were slightly firmer yesterday with the Euro-Stoxx 50 and Dow up 0.1 and 0.2 percent respectively – given the generally supportive data it is perhaps surprising they did not rally more. This morning in Asia, the equity markets are generally weaker with the Nikkei off 0.2 percent, the Hang Seng is off 0.7 percent, the CSI 300 is up 0.2 percent and the Kospi is off 1.1 percent.
Currencies – the dollar index tried higher yesterday, rising to 97.68, but it is last at 97.33, the euro is consolidating at 1.0935, sterling is weak at 1.5216, the yen is off its earlier lows of 125.05, last at 124.59, the aussie is last at 0.7685, after yesterday’s low of 0.7596, the rouble is weaker at 53.46 and the yuan is at 6.1972. India’s rupee is at 63.85 as the RBI cut rates to 7.25 percent from 7.5 percent – the third cut this year.
The economic agenda is fairly busy – Japan’s monetary base expanded more than expected and average cash earnings increased 0.9 percent, having been expected to rise 0.4 percent. Later data is out on Spanish and German unemployment change, UK construction PMI, UK lending, mortgage approvals and money supply, EU CPI and PPI and US data includes factory orders, economic optimism and total vehicle sales. FOMC member Lael Brainard is speaking – see table below for more details.
The base metals seem to be finding some underlying support and the generally supportive manufacturing PMI data yesterday, combined with the recent price pullbacks, seem to be helping. The likes of aluminium and nickel had fallen hard so bargain hunting is not surprising and limited follow through selling on the likes of copper, zinc and tin, having breached support levels on the charts, suggests they have encountered scale down buying. As such, we would not be surprised to see prices work higher for a while.
The precious metals look vulnerable after yesterday’s failed upside spikes – that said it is interesting that when the buying did turn up, prices moved fast, although lack of follow through buying suggests the energy for yesterday’s run higher came mainly from short-covering. On balance, we would not be surprised to see prices work lower, platinum looks increasingly oversold with prices approaching the March lows, while gold, silver and palladium are all some distance above the March lows.
| Overnight Performance | ||||
| BST | 06:25 | +/- | +/- % | Lots |
| Cu | 6014.5 | 12 | 0.2% | 1892 |
| Al | 1761 | 3.5 | 0.2% | 191 |
| Ni | 12925 | -40 | -0.3% | 718 |
| Zn | 2159.5 | 4.5 | 0.2% | 681 |
| Pb | 1933.5 | 3.5 | 0.2% | 90 |
| Sn | 15490 | -5 | 0.0% | 4 |
| Steel | 300 | 0 | 0.0% | Total |
| Average (BM ex-Steel) | 0.1% | 3,576 | ||
| Gold | 1188.1 | -0.4 | 0.0% | |
| Silver | 16.7 | -0.02 | -0.1% | |
| Platinum | 1102.8 | 1.8 | 0.2% | |
| Palladium | 770 | 0 | 0.0% | |
| Average PM | 0.0% | |||
| SHFE Prices 06:34 BST | Change | % Change | |
| Cu | 43540 | -270 | -0.6% |
| AL | 13170 | 0 | 0.0% |
| Zn | 16520 | -155 | -0.9% |
| Pb | 13260 | -5 | 0.0% |
| Ni | 98920 | 1810 | 1.9% |
| Sn | 116190 | 180 | 0.2% |
| Average change (base metals) | 0.1% | ||
| Rebar | 2367 | 2 | 0.1% |
| Au | 240.4 | -0.95 | -0.4% |
| Ag | 3660 | 1 | 0.0% |
| Economic Agenda | |||||
| BST | Country | Data | ACTUAL | Expected | Previous |
| 2:50am | Japan | Monetary Base y/y | 35.6% | 34.3% | 35.2% |
| 2:30am | Japan | Average Cash Earnings y/y | 0.9% | 0.4% | 0.0% |
| 8:00am | Spain | Spanish Unemployment Change | -115.4K | -118.9K | |
| 8:55am | Germany | German Unemployment Change | -10K | -8K | |
| 9:30am | UK | Construction PMI | 55.1 | 54.2 | |
| 9:30am | UK | Net Lending to Individuals m/m | 2.3B | 3.1B | |
| 9:30am | UK | M4 Money Supply m/m | 0.4% | 0.3% | |
| 9:30am | UK | Mortgage Approvals | 64K | 61K | |
| 10:00am | EU | CPI Flash Estimate y/y | 0.2% | 0.0% | |
| 10:00am | EU | Core CPI Flash Estimate y/y | 0.7% | 0.6% | |
| 10:00am | EU | PPI m/m | 0.1% | 0.2% | |
| Tentative | UK | 10-y Bond Auction | 1.88|1.5 | ||
| 3:00pm | US | FOMC Member Brainard Speaks | |||
| 3:00pm | US | Factory Orders m/m | 0.0% | 2.1% | |
| 3:00pm | US | IBD/TIPP Economic Optimism | 49.8 | 49.7 | |
| All Day | US | Total Vehicle Sales | 17.0M | 16.5M | |
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