Precious metals came under further downside pressure yesterday even though the dollar remained weak. Gold closed down 0.7 percent at $1,176.40, after posting a low of $1,172.50. So whereas the $1,180/oz level has been broken, the $1,170.20 low from May 1 has held so far. The pullback in gold seems to be due to optimism that an eleventh-hour deal would be made over Greece’s debt – whether that remains the case now that Greece has decided to delay today’s payment to the IMF remains to be seen. Weakness in gold may also have something to do with investors needing to raise cash for margin calls against falling bond prices. Silver was hardest hit it closed down 2.1 percent at $16.12, while the PGMs held up better, they were down around 0.2 percent.
The base metals were for the most part weak, they closed down an average of 0.9 percent with heavy falls in lead, zinc and copper, while aluminium and nickel did not suffer much. Further warrant cancellations in nickel, amounting to 2,922 tonnes, even though stocks continue to rise, seem to be causing some positioning in nickel, which we tie into the potential squeeze in Shanghai July nickel positions. Copper prices closed at $5,920.5, down 1.4 percent on the day and are back closer to the range we have been calling for, which is for prices to trade in the $5,800-$5,900 area, see Today Copper report.
This morning the base metals are little changed, nickel having been unchanged yesterday has drifted 0.3 percent to $12,900, while the rest of the complex are plus, or minus 0.1 percent, with copper at $5,929. Volume remains weak with 2,267 lots, with nickel picking up more interest than all the others, except copper.
Silver and palladium are up around 0.4 percent this morning, while gold and platinum are little changed with gold at $1,177.80 – considering Greece has decided to delay its payment to the IMF today, instead opting to bunch all June payments together, it is surprising that the market is still so complacent over the Greece situation.
In Shanghai, the base metals are down an average of 0.7 percent, copper leads the decline with a 1.4 percent drop to Rmb 42,900, lead is up 0.1 percent, while the rest are down between 0.6 and 0.8 percent – see table below for more details. Spot copper in Changjiang is off 1.3 percent at Rmb 43,100-43,200, the spread with the August date is at an equivalent of $48 per tonne, while the LME/Shanghai copper arb ratio is at 1 to 7.24.
Bullion prices in Shanghai are weaker with silver off 1.8 percent and gold is off 0.7 percent.
Equities – The Euro Stoxx 50 closed off 0.8 percent and the Dow was off 0.9 percent with concerns over Greece starting to send some jitters through the equity market, even though the US labor market showed signs of strength. In Asia this morning, the markets are under pressure with the Nikkei off 0.5 percent, the Hang Seng is down 0.7 percent, the CSI is off 0.3 percent and the Kospi is down 0.3 percent.
Currencies – the dollar index dropped to 94.64 yesterday, it is last at 95.59, the euro is at 1.1223 after reaching a high of 1.1380, sterling is last at 1.5360, the aussie is at 0.7704, the yen remains weak at 124.44, the rouble is trending down again, last at 56.98 as the conflict in Ukraine picks up again and the yuan is weaker too at 6.2072. The euro is firmer on the stronger inflation situation and like most of the other markets seems to be taking developments over Greece in its stride.
The economic agenda is focused on the US employment report – the forecast is for 222,000 jobs. Data out already showed Japan’s leading indicators edged higher, later we get German factory orders, France’s trade balance, UK consumer inflation expectations, US consumer credit and FOMC member William Dudley is speaking – see table below.
Copper and zinc are the two metals leading the retreat, the others are either already in low ground, as is the case with aluminium and nickel, while lead and tin are holding up in mid-ground. We have generally expected those metals that are not already around their lows to drift lower, which copper and zinc are doing, we wait to see if lead follows suit. For now, lead seems well supported on the LME and in Shanghai. We wait to see if today’s SHFE inventory data shows lead stocks continuing their decline – likewise it will be interesting to see if copper stocks continue to fall.
Precious metals are under pressure despite the weaker dollar of late – the PGMs are looking oversold again, but with gold and silver under pressure that is not surprising. With investor sentiment for gold so weak gold prices may well continue lower, but we do feel this is leading to a better buying opportunity and given developments in Greece and with potential for corrections in other asset classes, it may not be too long before the markets start looking for a safe-haven again.
| Overnight Performance | ||||
| BST | 06:02 | +/- | +/- % | Lots |
| Cu | 5929 | 8.5 | 0.1% | 1435 |
| Al | 1746 | 1.5 | 0.1% | 201 |
| Ni | 12900 | -35 | -0.3% | 365 |
| Zn | 2140 | -1.5 | -0.1% | 228 |
| Pb | 1927 | -2 | -0.1% | 38 |
| Sn | 15420 | 0 | 0.0% | |
| Steel | 300 | 0 | 0.0% | Total |
| Average (BM ex-Steel) | 0.0% | 2,267 | ||
| Gold | 1177.8 | 1.4 | 0.1% | |
| Silver | 16.18 | 0.06 | 0.4% | |
| Platinum | 1099.4 | 0.4 | 0.0% | |
| Palladium | 755 | 3 | 0.4% | |
| Average PM | 0.2% | |||
| SHFE Prices 06:18 BST | Change | % Change | |
| Cu | 42900 | -590 | -1.4% |
| AL | 13045 | -75 | -0.6% |
| Zn | 16270 | -115 | -0.7% |
| Pb | 13165 | 15 | 0.1% |
| Ni | 98200 | -800 | -0.8% |
| Sn | 114390 | -680 | -0.6% |
| Average change (base metals) | -0.7% | ||
| Rebar | 2332 | -67 | -2.8% |
| Au | 238.3 | -1.75 | -0.7% |
| Ag | 3573 | -67 | -1.8% |
| Economic Agenda | |||||
| BST | Country | Data | ACTUAL | Expected | Previous |
| 6:00am | Japan | Leading Indicators | 107.2% | 107.3% | 106.0% |
| 7:00am | Germany | German Factory Orders m/m | 0.6% | 0.9% | |
| 7:45am | France | French Trade Balance | -4.0B | -4.6B | |
| 9:30am | Uk | Consumer Inflation Expectations | 1.9% | ||
| All Day | ALL | OPEC Meetings | |||
| 1:30pm | US | Non-Farm Employment Change | 222K | 223K | |
| 1:30pm | US | Unemployment Rate | 5.4% | 5.4% | |
| 1:30pm | US | Average Hourly Earnings m/m | 0.2% | 0.1% | |
| 5:30pm | US | FOMC Member Dudley Speaks | |||
| 8:00pm | US | Consumer Credit m/m | 16.5B | 20.5B | |
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