METALS MORNING VIEW 28/03: Metals prices consolidating after recent weakness

Mar 28, 2018 - 10:22 AM GMT
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In precious metals, gold and silver are consolidating recent gains, with prices off by 0.3% and 0.4% respectively, with gold at $1,341.05 per oz. Meanwhile, platinum prices are up by 0.2% and palladium prices are up by 0.3%.

Gold’s strong rebound following last week’s FOMC rate decision, which has also been fueled by a pick-up in trade tensions, is now consolidating and we expect the dips to be well supported. Silver is mirroring gold’s move, while platinum and palladium prices are taking their cue from the weaker industrial metals.

Base metals prices on the London Metal Exchange are down across the board by an average of 0.6% this morning, Wednesday March 28. Losses are bunched together between 0.9% for lead and 0.3% for aluminium, with copper off by 0.7% at $6,613 per tonne.

Volume has been average with 7,833 lots traded as of 07:47 am London time.

Although prices are lower, most of the metals seem to be trying to consolidate, having appeared to start putting in bases in recent days – the exception is aluminium that continues to sink, it is at the lowest it has been since mid-December 2017.

On the Shanghai Futures Exchange this morning, base metals prices are down by an average of 0.4%, led by a 1.2% fall in tin prices. Lead prices are bucking the trend with a 0.5% gain and copper prices are off by 0.1% at 49,400 yuan ($7,871) per tonne. Spot copper prices in Changjiang are down by 0.4% at 49,080-49,200 yuan per tonne and the LME/Shanghai copper arbitrage ratio is at 7.47.

In other metals in China, iron ore prices are down by 1.7% at 435 yuan per tonne on the Dalian Commodity Exchange. On the SHFE, steel rebar prices are up by 0.5%, while gold and silver prices are down by 0.7% and 1.1% respectively.

In wider markets, spot Brent crude oil prices are up by 0.32% at $69.76 per barrel and the yield on US 10-year treasuries is weaker at 2.78%, as is the German 10-year bund yield at 0.49%.

Equity markets in Asia are weaker this morning: CSI 300 (-1.84%), ASX 200 (-0.73%), Hang Seng (-1.73%), Kospi (-1.34%) and Nikkei (-1.34%). This follows a mixed performance in western markets on Tuesday, where in the United States the Dow Jones closed down by 1.43% at 23,857.71, while in Europe the Euro Stoxx 50 closed up by 1.2% at 3,316.95.

The dollar index at 89.47 is trying to get some lift after a weaker start to the week, but while below the 90 level it is looking vulnerable. The major currencies are as a consequence slightly weaker: sterling (1.4146), euro (1.2388), yen (105.65) and Australian dollar (0.7678). The yuan is giving back some of its recent gains, it was recently quoted at 6.2821, having been as strong as 6.2409 on Tuesday. Most of the emerging market currencies we follow are on a back footing, the exception being the ringgit.

Economic data out already today showed Germany’s GfK consumer climate edged up to 10.9 from 10.8. Data out later includes UK CBI realized sales, UK GfK consumer confidence along with US data including final gross domestic product (GDP), GDP prices, goods trade balance, preliminary wholesale inventories, pending home sales and crude oil inventories. In addition, US Federal Open Market Committee (FOMC) member Raphael Bostic is speaking.

Most of the base metals started to see some bargain hunting on Monday and Tuesday – the exception is aluminium – but with prices off again this morning, the market seems to be waiting to see if earlier strength has just been a pause in the sell-off. Concerns over trade wars linger and that seems to be deterring bargain hunters from chasing prices higher. Overall, we remain bullish on the outlook for the global economy so we see this correction as temporary and are on the looking out for buying opportunities. The second quarter lies ahead and any let-up in trade tensions may well spark another round of buying from consumers and investors alike.

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