Palladium and silver prices lead the rebound, gold price firmer too

Aug 28, 2015 - 7:04 AM GMT
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The relief rally led to a strong rebound in base metals yesterday with the complex closing up an average of 3.1 percent, led by a 5.2 percent gain in nickel and four percent gains in copper and zinc. Palladium, led the precious metals higher with a 7.1 percent gain, silver prices were up 2.8 percent, platinum was up 2.3 percent, while gold prices were up just 0.2 percent at $1,126.

This morning the base metals are up 0.4 percent on average, with zinc up 1.1 percent at $1,770, while copper is off 0.3 percent at $5,109, while the rest are between little changed and up 0.5 percent. Volume has been high at 7,158 lots and although prices are up an average of 0.4 percent at the day’s highs average gains were 0.9 percent.

Palladium remains in the driving seat with a 0.9 percent gain to $575.10, gold is up 0.4 percent at $1,130.60, while the rest are little changed. Platinum’s discount to platinum is at $125.

In Shanghai, all the base metals are in positive territory with average gains of 1.5 percent, led by a 3.8 percent rise in nickel, zinc is up 1.6 percent and copper is up 1.5 percent at Rmb 39,250, aluminium is up 0.4 percent and lead and tin are up 0.9 percent. Spot copper in Changjiang is up 1.4 percent at Rmb 39,450-39,600, the backwardation with the futures is at an equivalent of $55 per tonne and the LME/Shanghai copper arb window remains open, although the ratio has slipped to 7.69.

In other metals in Shanghai, silver is up 2.2 percent, gold is up 0.6 percent, as is steel rebar, while iron ore is firmer at $53.90.

Equities – after the strength of Asian markets yesterday, Europe and US equities rebounded strongly with the Euro Stoxx 50 closing up 3.5 percent and the Dow was up 2.3 percent and that has flowed through to Asia for a second day of gains. The Nikkei is up three percent, the Hang Seng is up 0.5 percent, the CSI is up 1.3 percent and the Kospi is up 1.5 percent.

Currencies – the dollar index is consolidating at 95.68, the euro is giving back some of its recent gains, last at 1.1255, the aussie is firmer at 0.7170, the yen is weaker at 121.09, sterling is at 1.5435 and the rouble is firmer at 65.65. The yuan is at 6.4566, the rupiah, rupee, real and rand are all consolidating off recent lows.

The economic agenda is busy, data already out in Japan showed a mixed picture, with household spending falling less than previously and retail sales were stronger than expected at 1.6 percent, while CPI readings were flat to slightly weaker. Later we get CPI data out in Germany and Spain, UK GDP and US data includes goods trade balance, personal income, spending and prices, University of Michigan consumer sentiment and inflation expectations – see table below for more details.

Relief rebounds are underway in the base metals and we wait to see the extent of short-covering that emerges. Given some extended gross short positions amongst money managers/funds on the LME and Comex, there is potential for considerable profit-taking by shorts that could drive prices higher and rebounding prices may also prompt some bargain hunting. So for now we would not be surprised for the rallies to go further, but with the fundamentals generally bearish we would see any strength as a counter trend move.

The industrial precious metals are likely to see prices rebound further as many have become oversold and a rising tide might lift gold too, but generally we would expect dips in gold to be supported.

 

Overnight Performance      
BST 06:14:26 +/- +/- % Lots
Cu 5109 -15 -0.3% 4325
Al 1564 7 0.4% 715
Ni 10035 5 0.0% 963
Zn 1770 20 1.1% 992
Pb 1686 8.5 0.5% 153
Sn 13945 45 0.3% 10
Steel 300 0 0.0%  Total 
Average (BM ex-Steel) 0.4% 7158
Gold 1130.6 4.6 0.4%
Silver 14.5 0 0.0%
Platinum 1004.7 0.7 0.1%
Palladium 575.1 5.1 0.9%
Average PM   0.3%

 

SHFE Prices 6:15 BST   Change % Change
Cu 39250 570 1.5%
AL 11915 50 0.4%
Zn 14635 235 1.6%
Pb 13380 125 0.9%
Ni 77990 2840 3.8%
Sn 100630 860 0.9%
Average change (base metals) 236.5   1.5%
Rebar 1970 12 0.6%
Au 235.4 1.4 0.6%
Ag 3336 73 2.2%

 

Economic Agenda
BST Country Data ACTUAL Expected Previous
12:30am Japan Household Spending y/y -0.2% 0.9% -2.0%
12:30am Japan Tokyo Core CPI y/y -0.1% -0.1% -0.1%
12:30am Japan National Core CPI y/y 0.0% -0.2% 0.1%
12:30am Japan Unemployment Rate 3.3% 3.4% 3.4%
12:50am Japan Retail Sales y/y 1.6% 1.1% 1.0%
All Day Germany German Prelim CPI m/m -0.1% 0.2%
 8:00am Spain Spanish Flash CPI y/y -0.1% 0.1%
9:30am UK Second Estimate GDP q/q 0.7% 0.7%
9:30am UK Prelim Business Investment q/q 1.6% 2.0%
9:30am UK Index of Services 3m/3m 0.7% 0.4%
Tentative Italy Italian 10-y Bond Auction 1.83|1.4
1:30pm US Goods Trade Balance -62.3B
1:30pm US Core PCE Price Index m/m 0.1% 0.1%
1:30pm US Personal Spending m/m 0.4% 0.2%
1:30pm US Personal Income m/m 0.4% 0.4%
3:00pm US Revised UoM Consumer Sentiment 93.2 92.9
3:00pm US Revised UoM Inflation Expectations 2.8%
Day 2 ALL Jackson Hole Symposium