Industrial metals sell-off on Greek ‘No’ vote, gold holds ground

Otmane El Rhazi from The Bullion Desk.

The base metals are under considerable pressure this morning following the Greek referendum ‘No’ vote. The base metals are down an average of 2.2 percent at 07:30 BST and volume is high with 19,664 lots. Copper is off the most with a 3.3 percent drop to $5,560, followed by nickel that is down 3.2 percent at $11,555, while aluminium is off 0.9 percent. See table below for more details.

While there has been risk off across many markets, gold is little changed, it is off 0.1 percent at $1,166.90, while the industrial precious metals are off 0.9 percent on average, with palladium off 1.6 percent at $672.

In Shanghai, the base metals are off 3.3 percent on average with nickel off 4.7 percent and copper off 4.5 percent at Rmb 40,390. Steel rebar is off five percent. Over the weekend China announced a string of measures to try to halt the freefall in equities – it worked initially, but then CSI 300 sold off before rebounding later. Judging by the weakness in the metals we would say the markets are being affected as much by China, as they are Greece, with China no doubt likely to have a longer impact. See table below for more SHFE prices.

Equities – This morning the Nikkei is off 2.1 percent, the Hang Seng is off 4.1 percent, the CSI 300 has been volatile, but is last up 0.2 percent and the Kospi is down 2.4 percent and it looks as though the Dax is set to open down two percent.

Currencies – the dollar index is firmer at 96.28, but it has not leapt higher and the euro is weaker, it has been down to 1.0989, but is last at 1.1100. Sterling is last at 1.5557, the yen is firmer at 122.61 and the aussie is at 0.7512.

The economic agenda is going to be hijacked by how Europe and the markets handle the Greek ‘No’ vote. Data out shows weaker German factory orders, later we get EU retail PMI, EU Sentix investor confidence, US final services PMI and labor market conditions index.  

The flight to safety has by-passed gold, while the likes of German bunds are likely to rise.  With China’s equities correcting and with Greece in turmoil it does look as though the Fed is likely to remain on hold.

The base metals are all weaker in a knee-jerk reaction as the markets wait to see what the fall-out is. Once the shock has passed, we would expect the dips to attract bargain hunting, but expect a volatile day today. The dollar is firmer, but not that much firmer so at least that is not putting extra downward pressure on the metals.

The industrial precious metals are weak, but gold is off only $0.5 at $1,168 – given the weakness in many other asset classes perhaps gold is working as a safe-haven after all as prices have not rallied, but they have not sold off either. The PGMs are weak in line with other industrial metals.

Overnight Performance
BST	07:30	+/-	+/- %	Lots
Cu	5560.5	-190.5	-3.3%	10641
Al	1690	-15	-0.9%	2695
Ni	11555	-385	-3.2%	3009
Zn	1984	-40	-2.0%	2302
Pb	1735.5	-28.5	-1.6%	1009
Sn	13905	-295	-2.1%	8
Steel	300	0	0.0%	Total
	Average (BM ex-Steel)		-2.2%	19,664
Gold	1166.9	-1.3	-0.1%
Silver	15.56	-0.12	-0.8%
Platinum	1069.1	-10.9	-1.0%
Palladium	672	-11	-1.6%
	Average PM		-0.9%

 

SHFE Prices 07:34 BST		Change	% Change
Cu	40390	-1920	-4.5%
AL	12460	-225	-1.8%
Zn	15080	-460	-3.0%
Pb	12700	-320	-2.5%
Ni	85560	-4190	-4.7%
Sn	107040	-3450	-3.1%
Average change (base metals)			-3.3%
Rebar	2027	-107	-5.0%
Au	236.5	0.2	0.1%
Ag	3435	-20	-0.6%

 

Economic Agenda
BST	Country	Data	ACTUAL	Expected	Previous
6:00am	JPY	Leading Indicators	106.2%	106.2%	106.4%
7:00am	EUR	German Factory Orders m/m	-0.2%	0.0%	2.2%
9:10am	EUR	Retail PMI			51.40
9:30am	EUR	Sentix Investor Confidence		15.6	17.1
9:30am	GBP	Housing Equity Withdrawal q/q		-12.1B	-13.0B
2:45pm	USD	Final Services PMI		54.8	54.8
3:00pm	USD	ISM Non-Manufacturing PMI		56.5	55.7
3:00pm	USD	Labor Market Conditions Index m/m			1.3

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