Metals morning view: Precious metals prices split, gold and silver down

Feb 20, 2018 - 8:08 AM GMT

Precious metals prices are split between bullion and the platinum group metals (PGMs) with spot gold and silver prices down either side of 0.5% and the PGMs little changed. Spot gold was recently quoted at $1,339.61 per oz. This follows a quiet day for most of the precious metals on Monday, the exception being palladium were prices dropped 1%.

A rebound in the dollar is creating a bit of a headwind for gold and silver prices, but gold generally seems in favor and the broad based sell-off from two weeks ago may be encouraging some rotation out of equities and bonds into gold. Platinum prices are looking well placed to challenge resistance above $1,000 per oz and palladium prices seem to be rebounding after their recent 15.8% correction. A stronger dollar may delay moves to the upside though.

The metals prices on the London Metal Exchange are mixed this morning, Tuesday February 20, with aluminium and tin prices firmer by 0.2% and 0.7% respectively, while the rest are lower by an average of 0.7%. Copper prices are down 0.6% at $7,094 per tonne.

Needless to say, with China still on holiday volumes have been light with 1,625 lots traded as of 06:57 am London time.

This follows a mixed performance on Monday, when aluminium, nickel and zinc prices were little changed, with copper, lead and tin prices off 0.6%, 0.7% and 1.7% respectively. The main development on Monday was the increased tightness in aluminium spreads that saw the cash/three-month spread move out to $50 per tonne backwardation, with most of the tightness concentrated in the cash to March date.

Exchanges remain closed in China for the Lunar New Year holiday and will not reopen until Thursday February 22.

In wider markets, spot Brent crude oil prices are little changed at $65.57 per barrel and the yield on US 10-year treasuries has climbed again to 2.91% and the German 10-year bund yield is firmer too at 0.75%.

Equity markets in Asia are for the most part weaker – the Nikkei is down by 1.01%, the Kospi is down 1.13%, the ASX 200 is off 0.1% and the Hang Seng is up 0.05%. This follows weakness in western markets on Monday, where in Europe the Euro Stoxx 50 closed down by 0.55% at 3,407.79.

The dollar index’s rebound continues, it was recently quoted at 89.44, this after a fresh low of 88.25 on February 16. This is applying some downward pressure on other currencies with the euro at 1.2377, sterling at 1.3968, yen at 106.88 and the Australian dollar at 0.7924. The emerging market currencies we follow are if anything on a slight back footing, which reflects the slightly firmer dollar.

Economic data out already today showed a pick-up in German PPI to 0.5% from 0.2%, later there is data on German and EU ZEW economic sentiment, EU consumer confidence, UK industrial order expectations and there is an EU Econfin meeting.

Last week’s rebounds in the base metals have paused for now but prices are for the most part poised under recent highs and look well placed to continue to rally. Needless to say with China on holiday until Thursday, trading activity may be subdued. We remain bullish overall and expect dips to remain well supported, but we need to be cautious given the broad based correction two weeks ago in case rising bond yields prompt another bout of jitters. The tightness in aluminium spreads, which comes ahead of tomorrow’s third Wednesday, combined with the large stock increases of late, are probably just to do with shorts rolling February positions and we would expect that to pass over the next few days, although the next three days of LME stocks data could still hold some surprises is shorts are going to deliver against their February shorts, rather than roll them..

Overnight Performance
GMT 06:57 +/- +/- % Lots
Cu 7,094 -44.0 -0.6% 517
Al 2,205 3.5 0.2% 447
Ni 13,545 -125.0 -0.9% 288
Zn 3,548 -19.5 -0.5% 175
Pb 2,569 -19.5 -0.8% 192
Sn 21,540 140.0 0.7% 6
Average BM   -0.3%        1,625
Gold  1,339.61 -5.74 -0.4%  
Silver        16.54 -0.10 -0.6%
Platinum  1,003.80 0.80 0.1%
Palladium  1,030.80 -1.20 -0.1%
Average PM   -0.3%


Economic calendar
GMT Country Data Actual Expected Previous
7:00am Germany German PPI m/m 0.5% 0.3% 0.2%
10:00am Germany German ZEW Economic Sentiment 16 20.4
10:00am EU ZEW Economic Sentiment 28.4 31.8
All Day EU ECOFIN Meetings
11:00am UK CBI Industrial Order Expectations 12 14
3:00pm EU Consumer Confidence 1 1