Disappointing Chinese manufacturing PMI data out over the weekend that saw a reading of 50, has led to a weaker opening this morning with base metals prices down an average of 0.9 percent. Nickel has led the move with a 2.3 percent drop to $10,815, zinc is down 1.1 percent, aluminium is off 0.8 percent and copper is off 0.7 percent at $5,189. Volume has been stronger than normal with 10,392 lots traded – see table below for more details.
Precious metals are mixed with silver off 0.2 percent, palladium is up 0.4 percent at $610.50, platinum is up 0.1 percent and gold is little changed at $1,095.60.
In Shanghai, the base metals are down an average of 1.1 percent, with nickel leading the decline with a 2.3 percent drop, followed by zinc that is down 1.5 percent and copper that if off 1.3 percent at Rmb 37,900. Spot copper in Changjiang is off 0.5 percent at Rmb 38,700-38,900, the backwardation with the spread is at an equivalent of $161 per tonne, while the spot arbitrage window is open with the ratio at 7.44. It looks as though government policy in China to reduce pollution and clear the skies above Beijing for the parade to mark the end of the Second World War will hit heavy industry, especially steel production. This seems to be acting as an extra weight on raw material prices including iron ore, zinc and nickel.
Gold and silver prices in Shanghai are firmer with the gold price up 0.6 percent and silver up 0.1 percent.
Equities – On Friday the Euro Stoxx 50 closed up 0.5 percent, the Dow closed down 0.3 percent and Asia is weaker with the Nikkei off 0.2 percent, the Hang Seng is off one percent, the CSI 300 is off 1.4 percent and the Kospi is down 1.1 percent.
Currencies – the dollar index is holding up near high ground at 97.27, the euro is at 1.0978, sterling is relatively strong at 1.5634, the aussie is weak at 0.7295, while the rouble is weakening, last at 61.86 and the yuan is flat-lined at 6.2087.
The economic agenda is busy – Japan’s manufacturing PMi dipped to 51.2 from 51.4, later we get PMI readings out across Europe and US, US personal income and spending, construction spending and total vehicle sales. In addition, FOMC member Jerome Powell is speaking – see table below for more details.
The base metals remain depressed, the exception is tin as the market expects lower exports from Indonesia. The other base metals are either extending the downward trends, or are poised above support and are looking vulnerable. So for now the path of least resistance is to the downside with the poor Chinese economic outlook weighing on sentiment and prices. We wait to see if European PMI data provides any lift. While other economies around the globe are suffering it does raise doubt as to whether the Fed will start to increase interest rates in September – if the market starts to feel it will not, then that could see a correction in the dollar that in turn could provide some up lift to metals.
Gold has found some support around the $1,080 level and that seems to be underpinning the other metals, but rallies have tended not to last, so we would not expect too much. That said, if the dollar starts to pull back if the market feels the Fed will stay on hold, then a short-covering rally in gold could get going.
| Overnight Performance | ||||
| BST | 07:23:00 | +/- | +/- % | Lots |
| Cu | 5189 | -35 | -0.7% | 4710 |
| Al | 1607 | -13 | -0.8% | 1598 |
| Ni | 10815 | -250 | -2.3% | 1326 |
| Zn | 1896.5 | -21 | -1.1% | 2102 |
| Pb | 1691.5 | -8 | -0.5% | 645 |
| Sn | 16200 | 0 | 0.0% | 11 |
| Steel | 300 | 0 | 0.0% | Total |
| Average (BM ex-Steel) | -0.9% | 10392 | ||
| Gold | 1095.6 | -0.4 | 0.0% | |
| Silver | 14.73 | -0.03 | -0.2% | |
| Platinum | 982.4 | 1.4 | 0.1% | |
| Palladium | 610.5 | 2.5 | 0.4% | |
| Average PM | 0.1% | |||
| SHFE Prices 7:33 BST | Change | % Change | |
| Cu | 37900 | -480 | -1.3% |
| AL | 12145 | -115 | -0.9% |
| Zn | 14650 | -220 | -1.5% |
| Pb | 12970 | -45 | -0.3% |
| Ni | 80520 | -1930 | -2.3% |
| Sn | 110100 | -340 | -0.3% |
| Average change (base metals) | 236.5 | -1.1% | |
| Rebar | 2086 | -6 | -0.3% |
| Au | 221.05 | 1.35 | 0.6% |
| Ag | 3241 | 3 | 0.1% |
| Economic Agenda | |||||
| BST | Country | Data | ACTUAL | Expected | Previous |
| 2:35am | JPY | Final Manufacturing PMI | 51.2 | 51.4 | 51.4 |
| 2:45am | CNY | Caixin Final Manufacturing PMI | 47.8 | 48.3 | 48.2 |
| 8:15am | EUR | Spanish Manufacturing PMI | 54.2 | 54.5 | |
| 8:45am | EUR | Italian Manufacturing PMI | 54.6 | 54.1 | |
| 8:50am | EUR | French Final Manufacturing PMI | 49.6 | 49.6 | |
| 8:55am | EUR | German Final Manufacturing PMI | 51.5 | 51.5 | |
| 9:00am | EUR | Final Manufacturing PMI | 52.2 | 52.2 | |
| 9:30am | GBP | Manufacturing PMI | 51.6 | 51.4 | |
| 1:30pm | USD | Core PCE Price Index m/m | 0.1% | 0.1% | |
| 1:30pm | USD | Personal Spending m/m | 0.2% | 0.9% | |
| 1:30pm | USD | Personal Income m/m | 0.4% | 0.5% | |
| 2:45pm | USD | Final Manufacturing PMI | 53.8 | 53.8 | |
| 3:00pm | USD | ISM Manufacturing PMI | 53.6 | 53.5 | |
| 3:00pm | USD | Construction Spending m/m | 0.8% | 0.8% | |
| 3:00pm | USD | ISM Manufacturing Prices | 49.5 | 49.5 | |
| 3:50pm | USD | FOMC Member Powell Speaks | |||
| All Day | USD | Total Vehicle Sales | 17.2M | 17.2M | |
The post Gold price watching the dollar – poor global data may keep Fed on hold appeared first on The Bullion Desk.
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