Gold prices face headwinds

Mar 1, 2017 - 8:39 AM GMT
by

FastMarkets

Precious metals are split this morning, March 1, bullion prices are off slightly, with spot gold prices at $1,243.71 per oz, while the PGMs are up an average of around 0.5% – this after a generally weaker day on Tuesday when prices closed down an average of 0.8%.

The base metals prices on the London Metal Exchange are for the most part higher this morning, the exceptions are nickel and tin that are off marginally, while the rest are firmer, led by a 0.9% gain in zinc prices to $2,848 per tonne.

Lead prices are up 0.6% at $2,263 per tonne, while aluminium and copper prices are firmer by 0.1% and 0.3% respectively, with three-month copper prices at $6,000 per tonne. Volumes have been noticeably higher with 9,366 lots traded as of 06:45 GMT.

US president Donald Trump’s speech to Congress did not upset markets and manufacturing data out of China this morning has provided a firm base for the metals’ outlook. Today’s firmer tone also follows on from some follow through buying on Tuesday that saw the base metals complex climb an average of 0.5%, led by a 1.5% rise in tin and a 1.3% gain in aluminium.

In Shanghai this morning, the base metals on Shanghai Futures Exchange are up an average of 0.7%, with aluminium, copper and zinc prices leading on the upside with gains of 2%, 1.5% and 1.3% respectively, with copper prices at 48,540 yuan per tonne, lead and nickel are little changed, while tin prices are down 0.6%. Spot copper prices in Changjiang are up 1.3% at 48,160-48,360 yuan per tonne, the LME/Shanghai copper arb ratio has edged up to 8.08.

In other metals in China, May iron ore prices on the Dalian Commodity Exchange are off 1.3%, on the SHFE, steel rebar is down 1.2%, gold prices are off 0.9% and silver prices are off 0.6%. In international prices, spot Brent crude oil prices are slightly weaker at $56.38 per barrel, while the yield on US 10-year treasuries has edged up to 2.413%.

Equities saw the Euro Stoxx 50 climb 0.3% on Tuesday, but the Dow broke its twelve-day winning streak, it paused by edging lower by 0.1%. In Asia this morning, markets are for the most part slightly firmer with the Nikkei up 1.4%, the Kospi is up 0.3%, the Hang Seng is up 0.2%, the CSI 300 is up 0.1%, although the ASX 200 is off 0.1%. With Trump’s speech giving a lot of rhetoric but little detail the market has switched its focus to the US Federal Reserve and with the tone from the Fed getting more hawkish about a March rate rise, equities may start to face some headwinds. Lack of detail from Trump could add to that too.

In FX, the more hawkish US Fed has lifted the dollar index that was recently quoted at 101.71, and strength in the dollar is weighing on other currencies with the euro at 1.0540, the sterling at 1.2356, the yen at 113.60 and the Australian dollar at 0.7642. Emerging market currencies remain on a back footing too.

The economic agenda is extremely busy today, Japan’s final manufacturing PMI dipped to 53.3, as did China’s non-manufacturing PMI that came in at 54.2 from 54.6, but China’s manufacturing PMI climbed on both counts with the official data rising to 51.6 from 51.3 and the Caixin manufacturing index shot up to 51.7 from 51. Later today there is more PMI data out across Europe and the USA, plus German CPI and unemployment change, UK lending, US personal income, spending and PCE prices, construction spending, crude oil inventories, total vehicle sales and the Beige book – see table below for more details.

The base metals should take comfort from the better Chinese PMI manufacturing data and we expect that to be the main driver, but a more hawkish Fed and the stronger dollar that brings, may act as headwinds. That is, unless the markets’ view is that a more hawkish Fed signals the US recovery is gaining momentum, which would be a bullish factor, especially while interest rates are still relatively low. For now we remain bullish for the industrial metals, but with so much data out today and important data out over the rest of the week, there will be room for some increased trading activity/volatility. Also note that today is options declaration.

Gold prices are reacting to the bullishness in other markets and are easing accordingly as the bullishness raises the opportunity cost of holding gold. That said, with US president Trump’s speech not giving much substance there is still room for disappointment and as we move into March the focus on geopolitical issues in Europe will increase. As such, we would expect any dips in gold prices to be well supported. Silver and the PGMs may manage to hold up better than gold, given their industrial attributes.

Metal Bulletin publishes live futures reports throughout the day, covering major metals exchanges news and prices.

 

Overnight Performance
GMT 06:45 +/- +/- % Lots
Cu 6000 20.5 0.3% 3169
Al 1922.5 1.5 0.1% 2968
Ni 10950 -10 -0.1% 1058
Zn 2848 25 0.9% 1886
Pb 2263 14 0.6% 275
Sn 19255 -45 -0.2% 10
Average 0.3%        9,366
Gold 1243.71 -2.19 -0.2%  
Silver 18.273 -0.007 0.0%
Platinum 1021.5 4.5 0.4%
Palladium 772.2 5.2 0.7%
Average PM   0.2%

 

 

SHFE Prices 06:45 GMT RMB Change % Change
Cu 48540 710 1.5%
AL 14100 275 2.0%
Zn 23165 290 1.3%
Pb 18570 30 0.2%
Ni 90820 -100 -0.1%
Sn 146060 -860 -0.6%
Average change (base metals)     0.7%
Rebar 3523 -41 -1.2%
Iron ore 696 -9.5 -1.3%
Au 279.4 -2.45 -0.9%
Ag 4287 -27 -0.6%

 

 

Economic Agenda
GMT Country Data Actual Expected Previous
12:01am UK BRC Shop Price Index y/y -1.0% -1.7%
12:30am Japan Final Manufacturing PMI          53.3          53.6          53.5
12:47am China Non-Manufacturing PMI          54.2          54.6
12:54am China Manufacturing PMI          51.6          51.2          51.3
1:45am China Caixin Manufacturing PMI          51.7          50.9          51.0
 7:00am UK Nationwide HPI m/m 0.2% 0.2%
All Day Germany Prelim CPI m/m 0.6% -0.6%
8:15am Spain Manufacturing PMI          55.9          55.6
8:45am Italy  Manufacturing PMI          53.6          53.0
8:50am France Final Manufacturing PMI 52.3 52.3
8:55am Germany German Unemployment Change -10K -26K
8:55am Germany German Final Manufacturing PMI 57 57
9:00am EU Final Manufacturing PMI          55.5          55.5
9:30am Uk Manufacturing PMI 55.7 55.9
9:30am UK Net Lending to Individuals m/m 4.0B 4.8B
9:30am UK M4 Money Supply m/m -0.1% -0.5%
9:30am UK Mortgage Approvals 69K 68K
Tentative Germany German 10-y Bond Auction 0.33|2.2
1:30pm US Core PCE Price Index m/m 0.3% 0.1%
1:30pm US Personal Spending m/m 0.3% 0.5%
1:30pm US Personal Income m/m 0.3% 0.3%
2:45pm US Final Manufacturing PMI          54.4          54.3
3:00pm US ISM Manufacturing PMI          56.2          56.0
3:00pm US Construction Spending m/m 0.7% -0.2%
3:00pm US ISM Manufacturing Prices          68.5          69.0
3:30pm US Crude Oil Inventories 1.5M 0.6M
All Day US Total Vehicle Sales 17.7M 17.6M
6:00pm US FOMC Member Kaplan Speaks
7:00pm US Beige Book
11:00pm US FOMC Member Brainard Speaks