Precious metals corrected some of their recent gains yesterday, prices were down an average of 1.1 percent as the fear factor over China’s currency devaluation eased. Gold prices eased 0.8 percent to $1,114.80.
The base metals consolidated yesterday with most metals little changed, the exceptions were nickel and aluminium that dropped 1.4 and 0.9 percent respectively. Copper was off 0.2 percent at $5,177.
The base metals market seem back to normal now as volume has dropped to low levels again with 1,794 lots traded as of 06:25 BST – compared with average volume in the first four days of the week at a similar time of 12,700 lots. Nickel has recovered some of yesterday’s losses with a 0.8 percent rise, zinc and tin are off 0.3 percent, while the rest are little changed with copper at $5,177.
Precious metals are little changed this morning with gold prices at $1,113.60, after a peak of $1,126.80 yesterday and despite a slightly weak dollar with the euro around 1.1150.
Base metals in Shanghai are weaker across the board with average losses of 0.7 percent today, led by a 1.2 percent decline in nickel, while the rest are off between 0.5 and 0.7 percent. Spot copper in Changjiang is off 0.1 percent at Rmb 39,450-39,600, the backwardation has shrunk to an equivalent of $37 per tonne and the LME/Shanghai copper arb ratio is at 7.65, so the arb window is open, which may account for the smaller backwardation – the prospect of a pick-up in imports weighing on nearby prices.
Other metals in Shanghai are mixed with gold down 1.3 percent, silver off 0.7 percent and rebar off 0.2 percent, while iron ore is firmer at $57.02 – the explosions at Tianjin’s port may well raise iron ore prices in China for a while, but if China imports have to fall then that could put pressure on seaborne prices.
Equities rebounded yesterday with the Euro Stox 50 closing up 0.9 percent and the Dow ended little changed, but trading was quite choppy. In Asia this morning, markets are mixed with the Nikkei off 0.4 percent, the Hang Seng is up 0.1 percent, the CSI 300 is up 0.5 percent and the Kospi is up 0.4 percent.
A largely unchanged Chinese yuan fixing seems to have further quelled nearby currency concerns but there may be wider ramifications as the ripples and consequences flow through the global market in the months ahead (In 1997, the Asian financial crisis started when Thailand floated the baht in July, but it was not until November that the impact intensified in other countries). The yuan is last at 6.4425. The dollar index is at 96.38, a week ago it was at 98.34, which suggests the market is less certain of the Fed raising in September now. The euro and sterling are stronger at 1.1150 and 1.5613, the aussie is recovering, last at 0.7374, the yen is quiet at 124.40, the rouble is weak at 64.57, as are the rand, real, rupee and rupiah – the weakness in these EM currencies if sustained may well have far reaching consequences.
Data already out today shows disappointing GDP data in France that came out flat, below expectations for a 0.2 percent gain and Germany’s came in at 0.4 percent, up from the previous reading of 0.3 percent, but a pip below expectations. Data out later includes French non-farm payrolls, Italian GDP, UK construction output, EU CPI and GDP and there is a Euro group meeting this afternoon to decide whether to let a three-year bailout for Greece to go ahead. US data includes PPI, industrial production, capital utilisation rate and University of Michigan consumer sentiment and inflation expectations – see table below.
The base metals remain for the most part depressed, there have been half-hearted rebounds off the lows following the China shock but once again it seems as though the markets are struggling to hold on to the gains. With sentiment still bearish, the path of least resistance remains to the downside. The main bullish risk we see coming from potential for short-covering, but for that to happen something will need to spark higher prices. Perhaps a weaker dollar could do that, should it look like the Fed is less likely to move in September.
The precious metals did show some safe-haven buying, or possibly gold’s non-fiat currency role appeals to investors given how emerging market currencies have headed lower. With more fall-out, possibly delayed, from China’s currency moves likely it may be that gold prices avoid resuming their downward trend.
| Overnight Performance | ||||
| BST | 06:26:00 | +/- | +/- % | Lots |
| Cu | 5177 | 0 | 0.0% | 927 |
| Al | 1573 | 0 | 0.0% | 133 |
| Ni | 10535 | 85 | 0.8% | 534 |
| Zn | 1825.5 | -5 | -0.3% | 198 |
| Pb | 1737.5 | 0 | 0.0% | 2 |
| Sn | 15000 | -50 | -0.3% | |
| Steel | 300 | 0 | 0.0% | Total |
| Average (BM ex-Steel) | 0.0% | 1794 | ||
| Gold | 1113.6 | -1.2 | -0.1% | |
| Silver | 15.41 | 0.03 | 0.2% | |
| Platinum | 987.3 | -1.7 | -0.2% | |
| Palladium | 611 | -2 | -0.3% | |
| Average PM | -0.1% | |||
| SHFE Prices 6:38 BST | Change | % Change | |
| Cu | 39360 | -260 | -0.7% |
| AL | 12100 | -80 | -0.7% |
| Zn | 14865 | -80 | -0.5% |
| Pb | 13265 | -95 | -0.7% |
| Ni | 81720 | -1030 | -1.2% |
| Sn | 107770 | -610 | -0.6% |
| Average change (base metals) | 236.5 | -0.7% | |
| Rebar | 2084 | -5 | -0.2% |
| Au | 232.05 | -3.05 | -1.3% |
| Ag | 3497 | -26 | -0.7% |
| Economic Agenda | |||||
| BST | Country | Data | ACTUAL | Expected | Previous |
| 6:30am | France | French Prelim GDP q/q | 0.0% | 0.2% | 0.7% |
| 7:00am | Germany | German Prelim GDP q/q | 0.4% | 0.5% | 0.3% |
| 7:45am | France | French Prelim Non-Farm Payrolls q/q | 0.1% | 0.0% | |
| 9:00am | Italy | Italian Prelim GDP q/q | 0.3% | 0.3% | |
| 9:30am | UK | Construction Output m/m | 2.4% | -1.3% | |
| 10:00am | EU | Final CPI y/y | 0.2% | 0.2% | |
| 10:00am | EU | Flash GDP q/q | 0.4% | 0.4% | |
| 10:00am | EU | Final Core CPI y/y | 1.0% | 1.0% | |
| All Day | EU | Eurogroup Meetings | |||
| 1:30pm | US | PPI m/m | 0.1% | 0.4% | |
| 1:30pm | US | Core PPI m/m | 0.1% | 0.3% | |
| 2:15pm | US | Capacity Utilization Rate | 78.0% | 78.4% | |
| 2:15pm | US | Industrial Production m/m | 0.3% | 0.3% | |
| 3:00pm | US | Prelim UoM Consumer Sentiment | 93.5 | 93.1 | |
| 3:00pm | US | Prelim UoM Inflation Expectations | 2.8% | ||
The post Gold prices off highs, but holding up relatively well appeared first on The Bullion Desk.
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