Gold, silver and platinum prices have found bases and look set to remain rangebound

Nov 23, 2017 - 9:25 AM GMT
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Gold, silver and platinum prices have found bases and look set to remain rangebound for now. The lack of any immediate geopolitical tension over North Korea has reduced the need for haven demand. With equities still generally upbeat, the opportunity cost of holding bullion is high, but the fact precious metals prices are not trending lower given the strength in equities is noteworthy. The weaker dollar should help underpin firmer precious metals prices.

Base metals traded on the London Metal Exchange are for the most part weaker this morning, Thursday November 23, with prices down by an average of 0.4%. Lead (-1.2%) and nickel (-1.1%) lead on the downside, while the rest are between unchanged and down by 0.2%. Three-month copper prices are off by 0.2% at $6,922 per tonne.

Volume has been average with 6,300 lots traded as of 07:14 GMT.

This follows a mixed performance on Wednesday in which aluminium and copper prices rose by 0.6% and 0.3% respectively, lead prices fell by 0.6% and the rest were little changed.

The precious metals are also little changed this morning, with gold and platinum prices off 0.1%, while silver and palladium prices are unchanged. Spot gold prices were recently quoted at $1,289.88 per oz.

This follows a stronger performance on Wednesday when the complex closed with gains of between 0.3% and 0.7% – it seems the market read the US Federal Open Market Committee (FOMC) minutes as being more dovish than expected.

On the Shanghai Futures Exchange today, the base metals complex is split into two camps: lead prices are giving the worst performance with a 2.4% drop, tin prices are down by 1% and copper prices are off by 0.1% at 53,930 yuan ($8,150) per tonne, while aluminium, nickel and zinc prices are up by 0.5%, 0.4% and 0.3% respectively. Spot copper prices in Changjiang are off by 20 yuan per tonne at 53,780-53,950 yuan per tonne and the LME/Shanghai copper arbitrage ratio is unchanged at 7.79.

In other metals in China, iron ore prices are up by 4% to 491.50 yuan per tonne on the Dalian Commodity Exchange, steel rebar prices on the SHFE are up by 0.8%, and SHFE gold and silver prices are little changed.

In international markets, spot Brent crude oil prices are down by 0.2% at $63.11 per barrel. The yield on US ten-year treasuries is weaker at 2.32% and the German ten-year bund yield is at 0.35%.

Equities in Asia this morning are weaker, led by a 3.02% fall in China’s CSI 300, the Hang Seng is off by 0.66% and the Kospi is down 0.13%. Meanwhile, the ASX 200 is unchanged and the Nikkei is closed. The weakness in Chinese equities seems to be on concerns about a correction in the bond market. This morning’s weakness follows a drop in western markets on Wednesday where in the United States the Dow Jones closed down by 0.27% at 23,526.18 and in Europe where the Euro Stoxx 50 closed down by 0.47% at 3,562.65.

The weaker tone from the FOMC minutes has pushed the dollar lower as seen by the dollar index that has fallen to 93.22, down from 95.15 in late October and early November. The jury is still out whether the September-to-November rebound is a countertrend move within the 2017 downward trend, or is the start of a revival. Our view has been that the dollar has turned a corner and will continue to trend higher, at least into the first quarter of 2018 – a move in the dollar index below 92.50 would make us rethink this view. The other currencies are rising on the back of the weaker dollar with the euro at 1.1837, sterling at 1.3309, the yen at 111.20 and the Australian dollar at 0.7615.

The yuan at 6.5830 is also stronger and the other emerging currencies we follow are strengthening too.

The economic agenda is busy today, with flash purchasing managers’ index (PMI) data out across Europe, German gross domestic product (GDP) which rose by 0.8% quarter on quarter and later there is also data out on the United Kingdom’s GDP, business investment, index of services and CBI realized sales. Earlier, French PMI data beat expectations by a large margin, supporting our view that we are seeing concerted global growth.

Copper’s latest rebound is pausing this morning. The same is true for zinc and nickel prices, while lead prices are weaker and aluminium and tin are consolidating. We are wary of the pullback in China’s equity market in case it prompts follow-through weakness, but with iron ore and steel prices rallying strongly in China today, it does look as though it may be an isolated event. Good data out of Europe and the weaker dollar bode well, although with the US on holiday, trading may well be quiet.

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