Gold prices continue to hold up well

Feb 14, 2017 - 9:10 AM GMT


Precious metals are generally holding up well, indeed better than expected, up an average of 0.5% this morning February 14, with the PGMs up an average of 0.7%. Meanwhile, gold and silver prices are up 0.3% and 0.2% respectively, with spot gold prices at $1,229.45 per oz. Yesterday prices were off an average of 0.9%, with gold prices trading down to a low of $1,219.05 per oz, although bargain hunting was evident judging by the underlying tail on yesterday’s candlestick.

Base metals prices on the LME are up an average of 0.9% this morning, Tuesday February 14, with three-month aluminium gaining 1.3%, followed by nickel prices that are up 1.1% and zinc prices that are 1% firmer. Copper prices are up the least, with a 0.5% gain to $6,158 per tonne, little changed from this time yesterday.

That said, copper prices rallied to a high of $6,204 per tonne yesterday, February 13, but struggled to hold on to the higher numbers. Better-than-expected Chinese PPI and CPI data out this morning, however, are providing the markets with some lift. Volume on the LME has been average with 7,980 lots traded, with aluminium volume outpacing that of copper as of 06:37 GMT.

In Shanghai this morning, the base metals on the SHFE are up an average of 0.9%, although lead and zinc are bucking the trend, down 0.1% and 0.2% respectively, while aluminium is leading the advance with a 2% rise. The rest are up between 1.1% for copper (50,110 yuan per tonne) and 1.5% for nickel. Spot copper in Changjiang is down 0.4% at 49,300-49,500 yuan per tonne, but the fact it is lower while the futures are up suggests that the spot prices was established earlier in the day when prices were lower – with the Chinese CPI and PPI data then lifting prices.

In other metals in China, May iron ore prices on the DCE are up 1.5%, on SHFE steel rebar prices are up 0.4%, gold prices are off 0.1% and silver prices are up 0.6% – silver’s industrial attributes seem to be buoying prices enabling it to loosen its ties with gold prices.

In international markets, spot Brent crude oil prices are off 0.1% at $55.60 per barrel.

Equities were initially stronger yesterday: the Euro Stoxx 50 closed up 1.1% and the Dow continued higher, but then the rally faltered on the news that the White House national security adviser Michael Flynn had resigned – the Dow closed little changed. Markets in Asia are generally quiet this morning with the Nikkei off 1.1%, the Hang Seng, CSI 300 and ASX 200 all off 0.1% and the Kospi off 0.2%. So, more a pause than a correction it would seem.

In FX, the stronger tone in the dollar index was halted on the White House news, with the index recently quoted at 100.85 having set a high at 101.12 yesterday. The pause in the dollar has led to some strengthening in other currencies with the euro at 1.0611, the yen at 113.43, the aussie at 0.7672 and sterling at 1.2538.The yuan has also halted its slide: it was recently quoted at 6.8602 and other emerging market (EM) currencies we follow are for the most part firm, the exception being the ringgit. Firmer EM currencies generally bodes well as it suggests risk-on.

The economic agenda is busy today: as well as the Chinese CPI and PPI, Japan’s revised industrial production improved to 0.7% from 0.5% and Germany preliminary GDP for Q4 climbed to 0.4% from 0.2% in Q3. German CPI remained negative, falling 0.6%, which was unchanged from the previous reading.

Data out later includes Italian and EU GDP, a host of UK price data, German and EU ZEW economic sentiment, EU industrial production and US data includes NFIB small business index, PPI and CPI. In addition, Fed Chair Janet Yellen testifies to the Senate Banking Committee, there is a Fed monetary policy report and FOMC member Robert Kaplan is speaking – see table below for more details.

Base metals prices have regained upward momentum. Although they are having to absorb scale up selling, for now the buying seems stronger than the selling and this morning’s slightly weaker dollar should help. With EM currencies and equities generally showing a risk-on environment there may well be more room on the upside. That said, all eyes will be on Janet Yellen’s semi-annual testimony before the Senate Banking Committee today and the House Financial Services Committee on Wednesday. The market will want to look at Yellen’s broader take on the US economy following the change in leadership and the Fed’s expectations for growth.

Gold prices are holding up well considering the strength in other markets, which suggests that while the opportunity cost of holding gold is high, the market still sees high risks of geopolitical issues developing. The rest of the precious metals are generally following gold’s lead, but are also benefitting more from their industrial attributes. We expect increased volatility around Yellen’s testimony today.

Overnight Performance
GMT 06:37 +/- +/- % Lots
Cu 6158 31 0.5% 2600
Al 1894.5 23.5 1.3% 3165
Ni 10805 120 1.1% 1155
Zn 2943.5 29.5 1.0% 897
Pb 2437 16 0.7% 147
Sn 19925 155 0.8% 16
Average 0.9%        7,980
Gold 1229.45 3.2 0.3%  
Silver 17.88 0.04 0.2%
Platinum 1000.8 5.8 0.6%
Palladium 778.4 6.4 0.8%
Average PM 0.5%


SHFE Prices 06:37 GMT RMB Change % Change
Cu 50110 560 1.1%
AL 14290 285 2.0%
Zn 23840 -40 -0.2%
Pb 19755 -20 -0.1%
Ni 89900 1370 1.5%
Sn 150270 1720 1.2%
Average change (base metals) 0   0.9%
Rebar 3414 15 0.4%
Iron ore 710.5 10.5 1.5%
Au 276.05 -0.25 -0.1%
Ag 4231 25 0.6%


Economic Agenda
GMT Country Data Actual Expected Previous
1:30am China CPI y/y 2.5% 2.4% 2.1%
1:30am China PPI y/y 6.9% 6.6% 5.5%
4:30am Japan Revised Industrial Production m/m 0.7% 0.5% 0.5%
7:00am Germany German Prelim GDP q/q 0.4% 0.5% 0.2%
7:00am Germany German Final CPI m/m -0.6% -0.6% -0.6%
 9:00am Italy Italian Prelim GDP q/q 0.3% 0.3%
9:30am UK CPI y/y 1.9% 1.6%
9:30am UK PPI Input m/m 1.0% 1.8%
9:30am UK RPI y/y 2.8% 2.5%
9:30am UK Core CPI y/y 1.7% 1.6%
9:30am UK HPI y/y 6.9% 6.7%
9:30am UK PPI Output m/m 0.4% 0.1%
10:00am EU Flash GDP q/q 0.5% 0.5%
10:00am Germany German ZEW Economic Sentiment 15.1 16.6
10:00am EU Industrial Production m/m -1.4% 1.5%
10:00am EU ZEW Economic Sentiment 22.3 23.2
11:00am US NFIB Small Business Index 105.1 105.8
1:30pm US PPI m/m 0.3% 0.3%
1:30pm US Core PPI m/m 0.2% 0.2%
3:00pm US Fed Chair Yellen Speaks
3:00pm US Fed Monetary Policy Report
6:00pm US FOMC Member Kaplan Speaks