Gold prices hit resistance as risk-on picks-up

Feb 10, 2017 - 9:27 AM GMT
by

FastMarkets

Precious metals this morning, Friday February 10, are generally weaker with prices down an average of 0.3%, ranged between 0.2% for gold prices that were recently quoted at $1,223.90 per oz and platinum prices that are down 0.8%. This follows average losses of 0.6% on Thursday, when gold led the declines with a 1.1% fall to $1,226.10 per oz. A stronger dollar and firmer equities seem to have turned the tide in gold prices – at least for now.

Base metals prices on the London Metal Exchange are mainly firmer this morning,  with three month prices up an average of 0.8%. Stronger-than-expected Chinese trade data bodes well for metal demand.

Lead and zinc prices lead the advance with gains of 1.5%, nickel prices are up 1% and copper is up 0.5% at $5,878 per tonne. Tin prices are up 0.3% at $19,180 per tonne, while aluminium is off slightly at $1,850 per tonne. Today’s moves show some dip buying following general weakness on Thursday when prices closed down an average of 0.7%, with lead showing particular weakness as prices were down 2.7%.

In Shanghai this morning, the base metals on Shanghai Futures Exchange have generally avoided reflecting the weakness seen on the LME on Thursday, as prices are up an average of 0.4%, led by a 1.4% rise in zinc prices, while copper and tin prices are up 0.6%, with copper at 47,950 yuan per tonne, nickel is the only metal showing some price weakness with prices down 0.2%. Spot copper in Changjiang is showing a fall of 0.8% to 46,800-46,920 yuan per tonne, which seems odd when futures are showing gains. The explanation seem to be that the spot price was set earlier in the day when prices were lower, but futures prices have since bounced following the China trade data release.

In other metals in China, May iron ore prices shot up 7% on the Dalian Commodity Exchange, on SHFE steel rebar prices are up 4.1%, while gold prices fell 1.2% and silver prices fell 0.8%. In international markets, spot Brent crude oil prices are little changed at $55.7 per barrel.

Equities were stronger on Thursday, the Euro Stoxx 50 closed up 1.2% and the Dow closed up 0.6%. The bullishness has flowed through to Asia this morning with the Nikkei up 2.5%, helped by the weaker yen, the Hang Seng is up 0.4%, the CSI 300 is up 0.5%, the Kospi is up 0.5% and the ASX 200 is up 1% – given the strong rise in iron ore prices perhaps that is not surprising.

In FX, the dollar index continues to rebound with the index recently quoted at 100.71 and US president Donald Trump’s pledge to announce tax reforms within weeks has given the market a boost. The stronger dollar is putting downward pressure on the euro at 1.0647 and the yen at 113.77, while sterling is flat at 1.2493 and the Australian dollar is firm at 0.7645. In emerging market currencies, most are showing little change, suggesting the dollar strength is for the most part affecting other major currencies.

In addition to Chinese trade data, Japan’s tertiary industrial activity dropped 0.4%, later there is a host of data out including industrial production in France, Italy, and the UK and US University of Michigan consumer sentiment and inflation expectations – see table below for more details

The base metals remain well placed to push ahead with their advances and the stronger Chinese trade data, combined with bullishness over Trump’s likely tax reforms, may well add fuel to the rallies that have in recent weeks continued to meet resistance at the higher numbers. The stronger dollar may act as a headwind, but given the renewed bullish undertone today prices may be able to forge ahead regardless.

Gold prices are feeling the pressure as risk-on increases in other markets and as the dollar strengthens too. We would not expect gold prices to rally in a straight line, so dips are likely, but it does not change our overall outlook for gold, which we expect will benefit from continuing haven buying on the back of geopolitical uncertainty.

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

Overnight Performance
GMT 06:57 +/- +/- % Lots
Cu 5878 30 0.5% 4065
Al 1850 -2 -0.1% 1151
Ni 10385 100 1.0% 1287
Zn 2872 43.5 1.5% 2861
Pb 2361.5 34.5 1.5% 362
Sn 19180 55 0.3% 22
Average 0.8%        9,748
Gold 1223.9 -2.2 -0.2%  
Silver 17.56 -0.07 -0.4%
Platinum 1000.7 -8.3 -0.8%
Palladium 765.7 0.7 0.1%
Average PM -0.3%
SHFE Prices 06:58 GMT RMB Change % Change
Cu 47950 270 0.6%
Al 13810 25 0.2%
Zn 23405 330 1.4%
Pb 19435 10 0.1%
Ni 86820 -150 -0.2%
Sn 146150 850 0.6%
Average change (base metals) 0 0.4%
Rebar 3371 132 4.1%
Iron ore 688 45 7.0%
Au 275.2 -3.25 -1.2%
Ag 4150 -33 -0.8%
Economic Agenda
GMT Country Data Actual Expected Previous
2:57am China Trade Balance 355B 295B 275B
3:24am China USD-Denominated Trade Balance 51.4B 49.8B 40.8B
4:30am Japan Tertiary Industry Activity m/m -0.4% -0.1% 0.3%
 7:45am France Industrial Production m/m -0.6% 2.2%
 7:45am France Prelim Non-Farm Payrolls q/q 0.3% 0.3%
9:00am Italy Industrial Production m/m 0.1% 0.7%
9:30am UK Manufacturing Production m/m 0.3% 1.3%
9:30am UK Goods Trade Balance -11.5B -12.2B
9:30am UK Construction Output m/m 1.1% -0.2%
9:30am UK Industrial Production m/m -0.2% 2.1%
1:30pm US Import Prices m/m 0.4% 0.4%
3:00pm UK NIESR GDP Estimate 0.5%
3:00pm US Prelim UoM Consumer Sentiment 97.9 98.5
3:00pm US Prelim UoM Inflation Expectations 2.6%
7:00pm US Federal Budget Balance -27.5B