The weaker silver price led the precious metals lower with a 1.9 percent drop to $16.46, the complex as a whole dropped 1.2 percent with gold off 0.7 percent at $1,184.80 – the weakness came despite a weaker dollar that saw the dollar index drop to 95.21 and a further rout in bonds. It appears as though the market is confident that a intermediate solution to Greece’s nearby payment schedule will be reached – the market seems to be relying on the usual policy that an 11th hour agreement will be reached.
Base metals put in a choppy performance on Wednesday, at the day’s highs prices were up an average of 0.8 percent and at the lows there were down an average of 0.7 percent – they closed up 0.2 percent, but that was skewed by a 1.1 percent rise in lead. Copper closed off 0.6 percent at $6,003.50, after a low of $5,998 – so the $6,000 area seems to be acting as a line in the sand.
This morning, the base metals are off an average of 0.4 percent with losses seen across the board varying from down 0.1 percent for copper, aluminium, 0.2 percent for tin, around 0.5 percent for lead and zinc and a 0.8 percent decline for nickel. Copper is last at $5,994.50. Volume remains low at 2,961 lots and nickel’s volume of 716 lots is second highest after 1,522 lots of copper.
Precious metals are consolidating with average gains of 0.2 percent this morning, led by a 0.4 percent in palladium, while gold is little changed at $1,185.
In Shanghai, the base metals are off an average of 0.9 percent, with all lower except lead that is unchanged. Nickel leads on the downside, it is off 2.1 percent, tin is off 1.2 percent, aluminium is off 0.3 percent while zinc and copper are off 0.8 percent with the latter at Rmb 43,400. Spot copper in Changjiang is off 0.7 percent at Rmb 43,600-43,750, the backwardation with the futures has increased to an equivalent of $55 per tonne, while the LME/Shanghai copper arb ratio is at 1 to 7.23.
Precious metals are down in Shanghai with December gold off 0.8 percent and silver down 1.2 percent.
Equities – the Euro Stoxx and Dow closed up yesterday by 0.6 percent and 0.4 percent respectively, which suggests money was coming out of bonds and moving into equities – we wait to see if some flows into gold. In Asia this morning, China’s CSI is having another jittery day with the index off 3.7 percent, the Nikkei is off 0.2 percent, the Hang Seng is down 1.3 percent and the Kospi is up 0.2 percent.
Currencies – the dollar index’s slide gathered pace yesterday with the index falling to 95.21. With generally good US data, apart from a weaker ISM non-manufacturing PMI yesterday, it seems as though the dollar weakness is a factor of strength in other currencies – a stronger euro on the back of higher bond yields was one factor, while other currencies were more mixed with the yen at 124.27, sterling at 1.5330, the aussie at 0.7717, the rouble weaker at 54.41 and the yuan at 6.1975. Other emerging market currencies including the rupee, rupiah and rand are weaker too, although the Brazilian real has bucked the trend after the central bank raised interest rates by 50 basis points to 13.75 percent.
The economic agenda is busy with Australia’s retail sales coming in flat, and the trade deficit rising to the worse on record as commodity prices fell – exports fell six percent and imports jumped four percent. Later we get EU retail PMI, the Bank of England’s rate decision and statement, the latest on the asset purchase facility and US data includes Challenger job claims, initial jobless claims, revised nonfarm productivity and labor costs and natural gas storage. In addition, FOMC member Daniel Tarullo is speaking – see table below for more details.
Copper is trading either side of the $6,000 level, it has broken below the up trend line that has underpinned the lows since February, but seems to be finding some support below $6,000 – the other base metals also seem to be finding good underlying support, especially lead. Whether this support is coming from the weaker dollar remains to be seen, the markets continue to look vulnerable though, but if inflation is starting to pick up in Europe then perhaps the outlook for the economy is improving and that could start to boost confidence. Countering that, however, was the OECD’s cut to its forecast for global growth to 3.1 percent from earlier forecasts of 3.7 percent. On balance, we feel those metals like aluminium and nickel that have already fallen sharply will now consolidate, while those still fairly elevated may well struggle on the upside and could fall back further to retest support levels.
Precious metals are edging lower despite the weaker dollar and gold looks on course to retest support at $1,180, with further potential support at $1,170. Optimism over Greece may be weighing on prices and the correction in the bond market might be worrying investors as higher yields will offer a better investment once the rout in bonds has run its course. We would not have been surprised to see some rotation from bonds to bullion during the correction, especially as the dollar is weaker, but that might be a secondary reaction.
| Overnight Performance | ||||
| BST | 06:16 | +/- | +/- % | Lots |
| Cu | 5994.5 | -9 | -0.1% | 1522 |
| Al | 1747 | -2.5 | -0.1% | 227 |
| Ni | 12840 | -100 | -0.8% | 716 |
| Zn | 2164 | -10 | -0.5% | 414 |
| Pb | 1941 | -8 | -0.4% | 76 |
| Sn | 15525 | -35 | -0.2% | 6 |
| Steel | 300 | 0 | 0.0% | Total |
| Average (BM ex-Steel) | -0.4% | 2,961 | ||
| Gold | 1185 | 0.2 | 0.0% | |
| Silver | 16.5 | 0.04 | 0.2% | |
| Platinum | 1102.3 | 1.3 | 0.1% | |
| Palladium | 757.1 | 3.1 | 0.4% | |
| Average PM | 0.2% | |||
| SHFE Prices 06:29 BST | Change | % Change | |
| Cu | 43400 | -340 | -0.8% |
| AL | 13115 | -40 | -0.3% |
| Zn | 16355 | -130 | -0.8% |
| Pb | 13175 | 0 | 0.0% |
| Ni | 98090 | -2140 | -2.1% |
| Sn | 114980 | -1400 | -1.2% |
| Average change (base metals) | -0.9% | ||
| Rebar | 2349 | -14 | -0.6% |
| Au | 239.6 | -1.95 | -0.8% |
| Ag | 3623 | -55 | -1.5% |
| Economic Agenda | |||||
| BST | Country | Data | ACTUAL | Expected | Previous |
| 2:30am | Aus | Retail Sales m/m | 0.0% | 0.4% | 0.2% |
| 2:30am | Aus | Trade Balance | -3.89B | -2.17B | -1.23B |
| 4:45am | Japan | 30-y Bond Auction | 1.53|3.1 | 1.51|2.7 | |
| 9:10am | EUR | Retail PMI | 49.5 | ||
| Tentative | France | French 10-y Bond Auction | 0.98|1.7 | ||
| 12:00pm | UK | Official Bank Rate | 0.5% | 0.5% | |
| 12:00pm | Uk | Asset Purchase Facility | 375B | 375B | |
| Tentative | UK | MPC Rate Statement | |||
| 12:30pm | US | Challenger Job Cuts y/y | 52.8% | ||
| 1:30pm | US | Unemployment Claims | 280K | 282K | |
| 1:30pm | US | Revised Nonfarm Productivity q/q | -2.8% | -1.9% | |
| 1:30pm | US | Revised Unit Labor Costs q/q | 5.8% | 5.0% | |
| 3:30pm | US | Natural Gas Storage | 119B | 112B | |
| 5:00pm | US | FOMC Member Tarullo Speaks | |||
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