Metals morning view: Precious metals prices weaker as China returns from holiday

Feb 22, 2018 - 9:00 AM GMT

Precious metals prices are for the most part weaker, with gold, silver and platinum prices off an average of 0.4%, while palladium prices are up 0.1%. The firmer dollar is no doubt weighing on sentiment.

Another turn around in the dollar has weighed on gold, especially as it has happened when gold prices are once again challenging recent highs. While the US treasury auctions have been underway, yields have remained bid and that has underpinned the dollar and weighed on gold. We wait to see what follows once the auctions are out the way. We expect dips to remain well supported.

The metals prices on the London Metal Exchange on Thursday February 22 are down an average of 1.6%, with nickel prices down the most with a 2.3% decline to $13,460 per tonne and copper prices off 1.6% at $7,024 per tonne.

With China back at work after the Lunar New year holiday, volumes on the LME have been high with 16,127 lots traded as of 07:32 am London time.

Wednesday’s trading had seen some strength ahead of China’s return to work, with copper, aluminium, nickel and tin closing up by an average of 1.2% – although lead and zinc closed down an average of 0.7%. This morning’s performance suggests Chinese traders have returned  to seefirmer prices and have sold into them.

In wider markets, spot Brent crude oil prices are weaker by 0.28% at $64.84 per barrel and the yield on US 10-year treasuries remains firm at 2.94% as US treasury auctions are underway, and the German 10-year bund yield has firmed to 0.73%.

In equity markets, China has returned on a positive footing with the CSI 300 up 2.16%. Elsewhere, the ASX 200 is up 0.12%, while the Nikkei is down 1.07%, the Hang Seng is off 1.31% and the Kospi is down 0.63%. This follows a weaker performance in western markets on Wednesday, where in the United States the Dow Jones closed down by 0.67% at 24,797.78, and in Europe where the Euro Stoxx 50 closed down by 0.14% at 3,430.16.

The dollar index’s rebound continues, it was recently quoted at 90.16, the fifth consecutive day of gains. This is applying some downward pressure on other currencies, with the euro at 1.2271, sterling at 1.3882 and the Australian dollar at 0.7796. But the yen’s slide had halted – it was recently quoted at 107.40, having touched 107.90 yesterday. The yuan has dropped to 6.3616 – before the Lunar New Year holiday it was around 6.3440 – and the emerging market currencies we follow remain on a back footing, which reflects the slightly firmer dollar and concern over rising US treasury yields.

The economic calendar is busy today as it includes French CPI, the German Ifo business climate, UK data on GDP, business investment, index of services and CBI realized sales, with US data including initial jobless claims, leading indicators, natural gas storage and crude oil inventories. In addition, Federal Open Market Committee member Raphael Bostic is speaking.

The base metals are on a back footing this morning. The fact Chinese traders have not come back in a bullish mood suggests overhead resistance may prove difficult to overcome for a while. With yesterday’s PMI reading, ex-US weaker than January’s readings, the economic climate looks less bullish. But that said, with most readings above 55 – so well above the 50 divide -, the global economy remains in expansion mode and that is bullish for the outlook for metals demand. As such, we would let this weakness runs its course and see the dips as leading to buying opportunities.

Overnight Performance
GMT 07:32 +/- +/- % Lots
Cu 7,024 -111.5 -1.6% 3,988
Al 2,174 -33.5 -1.5% 3,869
Ni 13,460 -320.0 -2.3% 1,882
Zn 3,460 -75.5 -2.1% 5,534
Pb 2,526 -36.5 -1.4% 822
Sn 21,495 -110.0 -0.5% 32
Average BM   -1.6%      16,127
Gold  1,320.98 -5.17 -0.4%  
Silver        16.43 -0.08 -0.5%
Platinum      987.50 -2.50 -0.3%
Palladium  1,021.50 1.50 0.1%
Average PM   -0.2%


SHFE Prices 07:34 GMT RMB Change % Change
Cu      52,760           200 0.4%
AL      14,130 –         140 -1.0%
Zn      26,325 –         155 -0.6%
Pb      19,270             80 0.4%
Ni   102,810           470 0.5%
Sn   147,140 –      1,270 -0.9%
Average change (base metals) -0.2%
Rebar  3,862.00 –      72.00 -1.8%
Au      273.85 –        1.15 -0.4%
Ag  3,676.00 –      31.00 -0.8%
Iron Ore (DCE) May’18 538.5 3 0.6%


Economic calendar
GMT Country Data Actual Expected Previous
 7:45am France French Final CPI m/m -0.1% -0.1%
9:00am Germany German Ifo Business Climate 117.1 117.6
9:30am UK Second Estimate GDP q/q 0.5% 0.5%
9:30am UK Prelim Business Investment q/q 0.5% 0.5%
9:30am UK Index of Services 3m/3m 0.4% 0.4%
11:00am UK CBI Realized Sales 13 12
12:30pm EU ECB Monetary Policy Meeting Accounts
1:30pm US Unemployment Claims 230K 230K
3:00pm US CB Leading Index m/m 0.7% 0.6%
3:00pm US FOMC Member Dudley Speaks
3:30pm US Natural Gas Storage -121B -194B
4:00pm US Crude Oil Inventories 2.2M 1.8M
5:10pm US FOMC Member Bostic Speaks