Gold, silver and platinum prices look set to remain rangebound

Nov 22, 2017 - 9:38 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 while the recent pullback in the dollar seems to have helped underpin the floor in prices. With equities still upbeat, the opportunity cost of holding bullion is high, but the fact precious metals prices are not trending lower is noteworthy. This evening’s FOMC minutes may well provide direction for the dollar and gold prices.

Base metals traded on the London Metal Exchange are for the most part firmer in the morning of Wednesday November 22, posting a marginal gain of 0.1% on average.

Aluminium prices rose the most with a 0.7% gain, copper prices are up by 0.4% at $6,945 per tonne while nickel prices are down by 0.5% and the rest are up between 0.1% and 0.2%.

Volume at 8am London time is 10,108 lots.

This morning’s performance follows a generally robust day of strength on Tuesday when all the base metals, with the exception of tin, were firmer. Tin prices closed down by 0.7%, while the rest closed up with average gains of 1.1%.

Silver, platinum and palladium prices are all up by 0.4% this morning, while gold prices tread water with a 0.1% gain with spot prices recently quoted at $1,283.60 per oz. This follows a day of strength on Tuesday when the complex closed up an average of 0.5%, led by a 1.2% gain in spot palladium prices to $1,000 per oz.

On the Shanghai Futures Exchange today, the base metals complex is mainly stronger, although tin and aluminium are struggling to follow, they are both down by 0.1%, while the rest are up between 0.8% for nickel and 1.6% for lead and copper prices, with the latter at 54,110 yuan ($8,179) per tonne. Spot copper prices in Changjiang are up by 1.3% at 53,750-53,970 yuan per tonne and the LME/Shanghai copper arb ratio has dropped to 7.79, from 7.90 on Tuesday, which suggests a pick-up in LME prices compared with SHFE.

Equities are bullish this morning and that suggests “risk on” remains, with the Hang Seng (+0.62%) reaching a 10-year high, the Nikkei at +0.48%, the Kospi +0.39%, the ASX 200 +0.38% and the CSI 300 +0.23%. This follows strength in western markets yesterday where in the United States the Dow Jones closed up by 0.69% at 23,590.83 and in Europe the Euro Stoxx 50 closed up by 0.2% at 3,586.42.

The dollar index is consolidating at 93.74 after a recent bout of weakness – 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 is that the dollar has turned a corner and will continue to trend higher, at least into the first quarter of 2018. The euro is stronger than it has been in recent weeks at 1.1759 but still looks vulnerable, while sterling is firmer at 1.3243, but there seems to be supply above 1.3300. The Australian dollar, at 0.7573, remains on a back footing, while the yen, at 111.99, is strong.

The economic calendar is fairly busy with the main focus on the US. Data includes durable goods orders, initial jobless claims, University of Michigan consumer sentiment and inflation expectation, crude oil and natural gas inventories and the Federal Open Market Committee (FOMC) meeting minutes. In addition, today is the United Kingdom’s Autumn budget and there is data on EU consumer confidence.

Copper prices on the LME seem to have ended their weaker tone after LME Week that saw prices consolidate the late-September and October gains. There was a lot of hype during LME Week about the bullish impact of electric vehicles (EV) and in recent weeks it seems to have dawned on the market that although EVs will boost metal consumption considerably, it is too early to price this in. That said, the underlying current fundamentals are already firm and look set to tighten further, so we are not surprised prices have found support. Overall, we expect rangebound markets as buyers and sellers take advantage of the top and bottom of the ranges.