Gold prices remain under pressure as Fed seen as being more hawkish

Nov 3, 2015 - 7:33 AM GMT
by

The precious metals put in a down day yesterday, led by a 4.3 percent plunge in palladium to $644, the rest were off between 0.8 and one percent, with gold prices at $1,133.10. This morning the precious metals are up an average of 0.7 percent, with bullion prices up 0.4 percent, while palladium is up 1.1 percent and platinum is up 0.8 percent.

A look at the break down in the volume so far today, see table below, shows aluminium is in the spotlight and that not surprising after Alcoa announced late last night that it going to cut smelting capacity by 503,000 tonnes. What is surprising is that prices are only up 1.3 percent to $1,510. The rest of the base metals are generally firmer, with gains of between 0.2 and 0.6 percent, the exception is nickel that is off 0.1 percent, but it was yesterday’s main gainer when prices rose one percent. Copper is up 0.2 percent at $5,130. Volume has been high with 8,020 lots traded.

In Shanghai, the base metals are mixed, with nickel off 0.4 percent, while the rest are between little changed and up 0.5 percent, with copper up 0.1 percent at Rmb 38,990. Surprisingly aluminium is up just 0.4 percent.

Spot copper in Changjiang is up 0.2 percent at Rmb 38,650-38,730, the spread is either side of level and the LME/Shanghai copper arb ratio remains near parity around 7.50.

In other metals in China, bullion prices are weaker with gold down 0.3 percent, silver off 0.1 percent, steel rebar is down 0.6 percent and iron ore remains weak at $49.50.

Equities were firmer yesterday with the Euro Stoxx 50 closing up 0.5 percent and the Dow closed up 0.9 percent and Asia is for the most part upbeat with the Hang Seng up 1.1 percent, the ASX200 up 1.4 percent, the Kospi up 0.7 percent, but China’s CSI is down 0.2 percent and Tokyo is on holiday.

Currencies – the dollar index is little changed at 96.80, the euro is attempting to edge higher, last at 1.1024, sterling is firm at 1.5430, the aussie is climbing, last at 0.7207 and the yen weaker at 120.65. Emerging market currencies seem in consolidation mode, suggesting they are less rattled by the Fed’s more hawkish stance from last week. The rupee and rand have, however, shown more weakness than other currencies of late.

Data out today includes Spanish unemployment change, UK construction PMI, US factory orders, IBD/TIPP economic optimism and total vehicle sales. In addition, ECB President Mario Draghi is speaking at 7pm GMT – see table below for more details.

It has seemed inevitable that more aluminium production cuts would be made and these are now starting to rollout in volume. Given non-Chinese companies are biting the bullet is likely to increase the pressure on China to stop dumping metal into the global market and this will be key as to whether the oversupply in the market now starts to be addressed. We would have expected more of a knee-jerk reaction to Alcoa’s cuts, maybe that still lies ahead. The rest of the metals remain on a back footing but we would not be surprised if the base metals complex as a whole benefits from the latest cutback news as it suggests more producers are being proactive.

The precious metals are under pressure due to the firmer Fed stance, it may take some poor US data to change that and see gold prices head higher again.

 

Overnight Performance      
GMT 06:30 +/- +/- % Lots
Cu 5130 10 0.2% 991
Al 1510 19 1.3% 4688
Ni 10130 -15 -0.1% 578
Zn 1698 10.5 0.6% 1017
Pb 1700.5 4 0.2% 116
Sn 14950 25 0.2% 2
Steel 300 0 0.0%  Total
  Average (BM ex-Steel) 0.4%         8,020
Gold 1137.7 4.6 0.4%
Silver 15.45 0.06 0.4%
Platinum 979.9 7.9 0.8%
Palladium 651 7 1.1%
Average PM 0.7%

 

SHFE Prices 06:46 GMT   Change % Change
Cu 38660 50 0.1%
AL 10370 40 0.4%
Zn 13790 70 0.5%
Pb 13145 0 0.0%
Ni 76650 -310 -0.4%
Sn 93540 -20 0.0%
Average change (base metals) 236.5   0.1%
Rebar 1786 -11 -0.6%
Au 232.6 -0.65 -0.3%
Ag 3387 -5 -0.1%

 

Economic Agenda
GMT Country Data ACTUAL Expected Previous
All Day Japan Bank Holiday
 8:00am Spain Spanish Unemployment Change 70.3K 26.1K
9:30am UK Construction PMI 58.9 59.9
3:00pm US Factory Orders m/m -0.8% -1.7%
3:00pm US IBD/TIPP Economic Optimism 47.5 47.3
All Day US Total Vehicle Sales 17.8M 18.2M
7:00pm EU ECB President Draghi Speaks