Precious metals are consolidating this morning Friday February 17, either side of unchanged with spot gold prices at $1,237.89 per oz, but this is after a bullish day on Thursday, when prices closed up with gains of between 0.3% and 0.6%.
The base metals on the London Metal Exchange are for the most part weaker this morning. Tin and copper prices are little changed, with three-month copper prices at $5,991 per tonne, while the rest are down an average of 1.1%. Volume has been average with 7,886 lots traded as of 06:25 GMT.
Thursday’s trading was also generally weaker with copper, aluminium, lead and tin prices down between 0.6% to 1.1%, while zinc was off 0.2% and nickel bucked the trend with a 1.3% gain to $11,050 per tonne – underpinned by a net bullish interpretation of the recent changes in nickel ore supplies from Indonesia and the Philippines.
In Shanghai this morning, the base metals trading on Shanghai Futures Exchange are weaker with prices down an average of 1.4%, led by a 2.5% drop in lead and a 2.2% fall in aluminium prices. Copper prices are off 1% at 48,470 yuan per tonne, zinc and tin prices are down 1.2% and 0.9%, respectively, and nickel is off the least with a 0.5% fall. Spot copper prices in Changjiang are off 0.9% at 48,460-48,660 yuan per tonne, a similar amount to the fall in the futures prices, suggesting prices started weaker this morning and have remained weak as profit-taking and scale-up selling emerges into the recent price strength. The LME/Shanghai copper arb ratio is at 8.09 which suggests the arb window remains closed.
In other metals in China, iron ore prices for the May Dalian Commodity Exchange contracts are up 0.5%, on SHFE steel rebar prices are up 1.1%, gold prices are up 0.7% and silver prices are off 0.1%. So apart from the ferrous part of the market, industrial metals seem to be consolidating today. In international markets, spot Brent crude oil prices are little changed at $55.70 per barrel and US ten year treasuries yields are around 2.4555%.
The latest equity run higher seems to have stalled with the Euro Stoxx 50 closing down 0.4% on Thursday and the Dow closed little changed at 20,620. Asian equities this morning are weaker with the Nikkei off 0.6%, the Hang Seng and CSI are down 0.4%, the ASX 200 is off 0.2% and the Kospi is off 0.1%.
In FX, the dollar index’s rally appears to have stalled, it was recently quoted at 100.53, which suggests the rebound in recent weeks, driven by US tax reform expectations, may have been just a counter trend move within the downward trend that has been seen since the start of the year – that is the chart view at least. But, on a macro view it seems more likely that interest rate rises and tax reforms will boost the dollar further – that is if these expectations are not already baked into the strong dollar that since the US election has climbed from around 97 to a high of 103.80.
The weaker dollar this morning has led to stronger major currencies with the euro at 1.0670, the yen is firmer at 113.40, while the sterling and the Australian dollar are flat at 1.2495 and 0.7697, respectively. The yuan at 6.8658 is consolidating and most of the other emerging market (EM) currencies we follow are slightly weaker. Following their recent show of strength EM currencies seem to be more in tune with the dollar. The one EM currency we are watching closely is the rand that is showing strength with its move below 13.0000.
The economic agenda is light with data coming out on the EU current account, UK retail sales and US leading indicators – see table below for more details.
The base metals seem to be consolidating recent gains, which in many of the metals have seen prices at levels not seen since 2015, while nickel and tin prices are consolidating after the strong rebounds that followed the January sell-offs. We generally remain bullish for the metals’ fundamentals but need to take into account that many of the metals prices have already moved a long way and going forward the market may need to see more evidence of tightness in the fundamentals, as in seeing exchange stocks fall, before prices can continue higher.
The precious metals prices, especially gold and silver, are looking robust – dips have been seen but they have been shallow and short-lived, even with the dollar showing strength in recent weeks. We remain bullish for the precious metals complex.
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