Metals morning view: Gold prices weaker following a day of strength

Feb 23, 2018 - 8:17 AM GMT

Gold prices are weaker this morning, with prices off 0.4% at $1,326.53 per oz, silver and platinum prices are little changed and palladium prices are up by 0.2%. This follows a day of strength on Thursday, when gold, silver and platinum closed up between 0.3% and 0.5% and palladium closed up 1.8%.

The down draft in gold prices seems to have halted now that the dollar’s rebound is paused. For now we would expect further consolidation, but we expect the general bullishness in metals to lead prices higher again before too long. We expect dips to remain well supported.

The base metals complex on the London Metal Exchange is mixed this morning, Friday February 23, with prices down by an average of 0.2%. Zinc prices lead the decline with a 0.8% fall to $3,501 per tonne, copper and nickel prices are off by 0.4% with the former at $7,143 per tonne, aluminium prices are bucking the trend with a 0.4% rise, while the rest are little changed.

Volume has returned to around average with 7,917 lots traded as of 06:56 am London time.

This follows a day of recovery on Thursday when prices dropped intraday before rebounding in the afternoon, which has left underlying tails on most of the metals’ candlestick charts.

On the Shanghai Futures Exchange, the base metals are for the most part stronger this morning, with gains averaging 1.1%. At the extremes nickel prices are up by 2.1% and tin prices are down by 0.1%, while copper prices are up by 1.6% at 53,620 yuan ($8,448) per tonne. Spot copper prices in Changjiang are up by 1.5% at 52,940-53,120 yuan per tonne and the LME/Shanghai copper arbitrage ratio stands at 7.51.

In other metals in China, iron ore prices are up by 2.0% at 548.00 yuan per tonne on the Dalian Commodity Exchange. On the SHFE, steel rebar prices are up by 1.5%, while gold prices are up by 0.35 and silver prices are up by 0.5%.

In wider markets, spot Brent crude oil prices are up by 0.11% at $66.24 per barrel, the yield on US 10-year treasuries has eased to 2.92%, as has the German 10-year bund yield which was recently quoted at 0.70%.

Equity markets in Asia are stronger across the board this morning: Nikkei (+0.72%), Hang Seng (+1.13%), CSI 300 (+0.45%), ASX 200 (+0.82%) and Kospi (+1.54%). This follows gains in western markets on Thursday, where in the United States the Dow Jones closed up by 0.66% at 24,962.48, and in Europe where the Euro Stoxx 50 closed up by 0.05% at 3,431.99.

The dollar index’s rebound ran out of steam yesterday and is consolidating this morning at around 89.99. This is leading to consolidation in the other currency majors: euro (1.2286), sterling (1.3931), yen (107.07) and Australian dollar (0.7817). The yuan is fairly flat at 6.3417 – before the Lunar New Year holiday it was around 6.3440 – and the emerging market currencies we follow are also consolidating.

On the economic calendar there is data on German final GDP, which came in unchanged at 0.6%, later there is EU CPI, China leading indicators and the Federal Reserve’s monetary policy report. In addition, UK’s Monetary Policy Committee member David Ramsden and Federal Open Market Committee members William Dudley, Loretta Mester and John Williams are speaking.

Thursday’s intraday price dips on the base metals that were followed by strong rebounds implies good bargain hunting interest, even if there is not yet much interest to chase prices higher. As such, we may well see prices hold up in high ground for longer while traders adjust and get more used to these price levels, before the rallies extend further.

Overnight Performance
GMT 06:56 +/- +/- % Lots
Cu 7,143 -27.5 -0.4% 3,163
Al 2,195 9.0 0.4% 1,141
Ni 13,765 -55.0 -0.4% 1,124
Zn 3,501 -29.0 -0.8% 2,170
Pb 2,553 1.0 0.0% 295
Sn 21,440 -45.0 -0.2% 24
Average BM   -0.2%        7,917
Gold  1,326.53 -4.02 -0.3%  
Silver        16.56 -0.02 -0.1%
Platinum      995.00 0.00 0.0%
Palladium  1,040.00 2.00 0.2%
Average PM   -0.1%


SHFE Prices 06:55 GMT RMB Change % Change
Cu      53,620           850 1.6%
AL      14,340           190 1.3%
Zn      26,620           210 0.8%
Pb      19,405           175 0.9%
Ni   105,050        2,140 2.1%
Sn   147,600 –         210 -0.1%
Average change (base metals) 1.1%
Rebar  3,940.00        59.00 1.5%
Au      274.60          0.75 0.3%
Ag  3,697.00        20.00 0.5%
Iron Ore (DCE) May’18 548 10.5 2.0%


Economic calendar
GMT Country Data Actual Expected Previous
7:00am Germany German Final GDP q/q 0.6% 0.6% 0.6%
10:00am EU Final CPI y/y 1.3% 1.3%
10:00am EU Final Core CPI y/y 1.0% 1.0%
12:00pm UK MPC Member Ramsden Speaks
2:00pm China CB Leading Index m/m 1.7%
3:15pm US FOMC Member Dudley Speaks
4:00pm US Fed Monetary Policy Report
6:30pm US FOMC Member Mester Speaks
8:40pm US FOMC Member Williams Speaks