Gold prices are consolidating as other markets rally

Feb 13, 2017 - 8:16 AM GMT


Precious metals are for the most part slightly weaker this morning, with spot gold and platinum prices off 0.2%, with gold at $1,231.15 per oz, while palladium prices are off 0.1% – although silver prices are bucking the trend with a 0.1% gain. Surprisingly, precious metals prices on Friday were upbeat seeing average gains of 1.1%, led by a 1.7% rise in silver, while gold prices closed up 0.6% at $1,233.30 per oz. These gains were seen despite a stronger dollar, but with oil prices stronger too, it may mean investors were buying into commodity baskets again.

Base metals prices trading on the LME have continued to strengthen this morning, Monday February 13, with three-month prices up an average of 0.9% as of 06:53 GMT. This follows on from 2.9% average gains on Friday, February 10.

BHP called force majeure at its Escondida mine on Friday, which was the catalyst to send copper prices up to a high of $6,091 per tonne to levels not seen since June 2015. The break higher removed the threat of what was potentially a double top overhanging the copper price chart. Copper prices ended up being up 4.1% on Friday and the run higher in copper dragged other metals up in its wake – the complex closed up an average of 2.9%.

In Shanghai this morning, the base metals are up an average of 3.1%, led by a 5.3% rise in copper prices to 50,070 yuan per tonne, with all the metals doing well. Spot copper in Changjiang is up 5.9% at 49,500-49,700 yuan per tonne, which puts the spread in a contango equivalent to some $54 per tonne, while the LME/Shanghai copper arb ratio is at 8.14.

In other metals in China, May iron ore prices are up 6.1% on DCE, on SHFE steel rebar prices are up 4.2%, while silver prices are up 1.7% and gold prices are off 0.1%. In international markets, spot Brent crude oil prices are off around 0.1% at $56.61 per barrel.

Equities were mixed on Friday with the Euro Stoxx 50 closing down 0.2%, while the Dow closed up 0.5%. Asia is upbeat this morning with the Nikkei up 0.4%, the Hang Seng is up 0.5%, the CSI 300 is up 0.6% and the ASX 200 is up 0.7%.

In FX, the dollar index has run up to 101.03 this morning, but it is now weaker at 100.79, the euro at 1.0633 has been weakening, as has the yen at 113.68, while sterling is flat at 1.2515 and the aussie ,as a commodity currency, is strong at 0.7670.

The economic calendar is light today with German WPI coming in up 0.8% for January, which was more than the expected 0.3%, but less than the 1.2% seen in December.

Copper prices broke higher on Friday and other base metals prices have rallied too with aluminium and zinc challenging former highs/resistance levels. Lead broke above nearby resistance at $2,400 per tonne, while tin and nickel have extended their rebound off recent weakness. With this happening soon into the Chinese Lunar New Year and ahead of the seasonally strong second quarter, it does look as though the market sentiment is voting with its feet, so we expect the rallies to continue and we wait to see if investor interest picks up too.

Gold prices showed some profit-taking last week and although prices got carried higher on Friday in the wake of the industrial metals’ rallies, gold’s rally is looking a bit tired for now. Given bullishness in other markets this is not surprising, especially with the markets eagerly waiting for more details about President Trump’s tax changes. Silver seems to be outperforming gold for now, the gold/silver ratio is falling,and the PGMs are holding up better too, which suggests their industrial attributes are attracting buying.

Overnight Performance
GMT 06:53 +/- +/- % Lots
Cu 6155 67 1.1% 8002
Al 1877.5 1.5 0.1% 1891
Ni 10685 35 0.3% 2013
Zn 2950.5 24.5 0.8% 3506
Pb 2437.5 35.5 1.5% 944
Sn 19700 275 1.4% 47
Average 0.9%       16,403
Gold 1231.15 -2.15 -0.2%
Silver 17.936 0.011 0.1%
Platinum 1006.9 -2.1 -0.2%
Palladium 781.6 -0.4 -0.1%
Average PM -0.1%


SHFE Prices 06:53 GMT RMB Change % Change
Cu 50070 2500 5.3%
AL 14010 190 1.4%
Zn 23975 760 3.3%
Pb 19935 575 3.0%
Ni 89070 2640 3.1%
Sn 150190 4250 2.9%
Average change (base metals) 0 3.1%
Rebar 3431 139 4.2%
Iron ore 708 40.5 6.1%
Au 276.25 -0.35 -0.1%
Ag 4233 70 1.7%