Gold prices consolidate ahead of US employment report

Aug 4, 2017 - 9:40 AM GMT
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Precious metals prices are stronger by an average of 0.4% this morning,  Friday August 4, led by a 0.6% gain in platinum to $966 per oz. Palladium prices are up 0.4% at $886.50 per oz, silver prices are also up 0.4% at $16.70 per oz, while gold prices are up 0.1% at $1,269.44 per oz. This after a generally stronger day on Thursday when platinum prices rose 1.7%, gold prices were up 0.3% and silver prices were up 0.6%, while palladium prices bucked the trend, slipping 1%.

Base metals traded on the London Metal Exchange are firmer across the board, with prices up by an average of 0.3% this morning. Zinc prices are once again leading the advance with a 0.9% gain to $2,819 per tonne, while the rest are up between 0.1% and 0.4%, with copper prices up 0.4% at $6,370 per tonne. Volume has been average with 6,497 lots traded as of 07:01 BST.

This comes after a generally weaker performance on Thursday, which saw gains in nickel, lead and tin prices, averaging 0.3%, while the rest were off an average of 0.4%.

On the Shanghai Futures Exchange (SHFE) this morning, tin prices are up 0.7%, lead and zinc prices are up 0.4% and 0.3%, respectively, while the rest are all off 0.1%, with copper prices at 50,300 yuan ($7,487) per tonne. Spot copper prices in Changjiang are down 0.2% at 50,060-50,210 yuan per tonne and the LME/Shanghai copper arb ratio is weaker at 7.90.

In other metals in China, September iron ore prices on the Dalian Commodity Exchange are up 1.3% at 576 yuan per tonne. On the SHFE, steel rebar prices are up 3.3%, while gold prices are up 0.2% and silver prices are off 0.1%.

In international markets, spot Brent crude oil prices are down 0.1% at $51.85 per barrel, the yield on US ten-year treasuries is weaker at 2.22%, and the German ten-year bund yield has fallen to 0.45%. Weaker bond yields suggest risk-off, perhaps with the market sighing after another grand jury was set up to probe into Russia’s interference in last year’s US election.

Equities were slightly firmer on Thursday with the Euro Stoxx 50 closing up 0.2% and the Dow closed up little changed at 22.007.58, having earlier set a fresh high at 22,044.85. The S&P 500 and Nasdaq composite were down 0.2% and 0.4%, respectively. Asian markets this morning are for the most part weaker with the Nikkei down 0.4%, the ASX 200 is off 0.2%, the CSI 300 and Hang Seng are little changed, while the Kospi is up 0.4%, but this comes after a 1.6% drop on Thursday.

The dollar index remains on a back footing at 92.75, the recent low being 92.53 – we wait to see whether today’s US employment report can provide support. While the dollar remains weak, the euro at 1.880 is strong, sterling weakened on Thursday and at 1.3135 remains off recent highs, the Australian dollar is consolidating at 0.7971, while the yen is firm at 110.11. The yuan at 6.7183 is strong, as are the rupee at 63.69 and the real at 3.1116, while the other emerging currencies we follow are little changed.

Today’s economic focus will be on the US employment report, where non-farm payrolls are expected to have climbed 180,000, with the unemployment rate falling to 4.3%. Data out already showed a 0.4% decline in Japan’s average cash earnings, while German factory orders climbed 1%. Later there is data on Italian retail sales and data on US trade balance.

The base metals are looking firmer again having had a few days of rest this week, nickel and lead have taken over the lead on the upside but copper, zinc and tin look well placed to push higher, while aluminium still seems to be in no hurry to follow, with prices seeming more likely to test support rather than resistance. We remain mildly bullish for the base metals complex especially while the dollar remains weak – any rebound in the dollar, which could be seen if the US employment report surprises in the upside, could create a headwind for the metals in the short term.

Gold prices are consolidating recent gains, they are in the upper half of the $1,200-$1,300 per oz sideways range that prices have been oscillating in since March. The weaker dollar seems to be the main bullish factor, so we should be prepared for some volatility when the US payroll data is released at 13:30 BST. Silver is shadowing gold’s performance, platinum finally seems to be playing catch-up on the upside, while palladium prices have run into supply ahead of the June highs.

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