Gold prices hold up well considering dollar strength

Mar 2, 2017 - 9:13 AM GMT
by

FastMarkets

The precious metals are little changed this morning, Thursday March 2, spot gold prices are off 0.2% at $1,244.45 per oz and palladium prices are up 0.2% at $774.80 per oz. On Wednesday, palladium prices were up 0.8%, silver prices were up 0.5%, while platinum prices were down 0.4% and gold was up 0.1% at $1,247.10 per oz.

The base metals on the London Metal Exchange are consolidating Wednesday’s gains this morning,  with prices off an average of 0.3%, with copper the only metal in positive territory at $6,019 per tonne, the rest are off between 0.3-0.4%.

Volume has been light at 4,282 lots as of 06:59 GMT. This morning’s consolidation comes after a day of gains that averaged 1.2% across the base metals on Wednesday, which was led by a 2.4% gain in three-month lead prices to $2,302 per tonne.

In Shanghai this morning, the base metals on the Shanghai Futures Exchange are up an average of 0.9%, with gains seen across the board, led by a 1.6% rise in lead prices, followed by a 1% rise in tin prices, with aluminium and copper up the least, with gains of 0.7%. April copper was recently quoted at 48,650 yuan per tonne, while spot copper in Changjiang was up 0.2% at 48,270-48,470 per tonne. The LME/Shanghai copper arb ratio is at 8.09, meaning the arb window remains closed.

In other metals in China, May iron ore prices are off 0.1% on the Dalian Commodity Exchange, on SHFE steel rebar prices are up 0.8%, gold prices are down 0.2% and silver prices are off 0.3%. In international markets, spot Brent crude oil prices are off 0.1% at $56.19 per barrel and yields on 10-year US treasuries are at 2.4594%.

Equities had a bullish day on Wednesday in the aftermath of US president Donald Trump’s speech and in light of generally bullish economic data that showed Chinese manufacturing PMI beat expectations, EU manufacturing PMI slightly below expectations, but still showing a healthy 55.4 and ISM manufacturing PMI jumping to 57.7 from 56. The Euro Stoxx 50 climbed 2.1%, the Dow climbed 1.5% and breached the 21,000 level and most markets are upbeat in Asia this morning. The Nikkei is up 0.8%, the Kospi is up 0.5%, the Hang Seng is up 0.3%, the ASX 200 is up 1.3%, although the CSI 300 is down 0.7%.

In FX, the dollar is rising with the dollar index at 101.90, helped by a more bullish US Fed talk even from those Federal Open Market Committee members who tend to be dovish. The euro is weaker at 1.0530, as are the sterling at 1.2282, the yen at 114.11 and the Australian dollar is treading water at 0.7657. In China the yuan is also weaker at 6.8848, but other emerging market currencies are slightly firmer which implies the dollar strength is against other major currencies and that emerging markets are not too perturbed about the prospect of higher US interest rates.

Today is another busy day for data, last night US total vehicle sales came in at 17.6 million units, annualised, which was unchanged from January. This morning, German import price data showed a rise of 0.9%, later there is data on Spanish, Italian and EU employment, UK construction PMI, EU CPI and PPI. US initial jobless claims, Challenger job cuts and natural gas storage. Later there is data out on Japanese CPI and unemployment – see table below for more details.

Aluminium extended gains on Wednesday, the other base metals were firmer but still seem to be capped by overhead supply, no doubt encouraged by the firmer dollar that is lifting metals’ prices denominated in other currencies. But, given good data we would not be surprised to see prices continue to work higher. Effervescent equity markets mean bullish sentiment is running high, there are risks of reality checks, but until then the path of least resistance is to the upside.

Given the strength in other markets and the dollar, combined with a rising expectation for a March US rate rise, it is not surprising that the precious metals are facing headwinds, but the fact prices are holding up well suggests strong underlying support – we expect dips will continue to be well supported.

Metal Bulletin publishes live futures reports throughout the day, covering major metals exchanges news and prices.

 

Overnight Performance
GMT 06:59 +/- +/- % Lots
Cu 6019 7 0.1% 1271
Al 1937 -5 -0.3% 1317
Ni 11000 -35 -0.3% 492
Zn 2851.5 -11.5 -0.4% 923
Pb 2294 -8 -0.3% 264
Sn 19450 -75 -0.4% 15
Average   -0.3%        4,282
Gold 1244.45 -2.65 -0.2%  
Silver 18.384 0.004 0.0%
Platinum 1012.9 -0.1 0.0%
Palladium 774.8 1.8 0.2%
Average PM 0.0%

 

 

SHFE Prices 06:58 GMT RMB Change % Change
Cu 48650 340 0.7%
AL 14125 95 0.7%
Zn 23235 195 0.8%
Pb 18840 290 1.6%
Ni 91120 680 0.8%
Sn 147600 1530 1.0%
Average change (base metals) 0.9%
Rebar 3544 28 0.8%
Iron ore 694 -0.5 -0.1%
Au 279.55 -0.6 -0.2%
Ag 4287 -11 -0.3%

 

 

Economic Agenda
GMT Country Data Actual Expected Previous
Wednesday US Total Vehicle Sales 17.6M 17.7M 17.6M
7:00am Germany German Import Prices m/m 0.9% 0.5% 1.9%
 8:00am Spain Spanish Unemployment Change 5.2K 57.3K
9:00am Italy Italian Monthly Unemployment Rate 12.0% 12.0%
9:30am UK Construction PMI 52.2 52.2
10:00am EU CPI Flash Estimate y/y 1.8% 1.8%
10:00am EU Core CPI Flash Estimate y/y 0.9% 0.9%
10:00am EU PPI m/m 0.5% 0.7%
10:00am EU Unemployment Rate 9.6% 9.6%
12:30pm US Challenger Job Cuts y/y -38.8%
1:30pm US Unemployment Claims 243K 244K
3:30pm US Natural Gas Storage -5B -89B
11:30pm Japan Household Spending y/y -0.3% -0.3%
11:30pm Japan National Core CPI y/y 0.0% -0.2%
11:30pm Japan Tokyo Core CPI y/y 0.2% -0.3%
11:30pm Japan Unemployment Rate 3.0% 3.1%