The base metals are down an average of 0.2 percent this morning, led by a 0.6 percent fall on copper to $5,815, while the rest are little changed – volume has been very light with just 3,091 lots traded as of 06:00 GMT – see table below for more details.
Precious metals are generally weaker, down an average of 0.2 percent with platinum off 0.5 percent at $1,138.90 and gold off 0.3 percent at $1,162.80, having earlier set a fresh low for the year at $1,158.80 indeed prices have not been this low since the short-lived shakeout after the Swiss gold referendum at the end of November.
Precious metals in Shanghai were weaker with gold and silver off between 0.7 and 0.8 percent.
The May base metals contracts in Shanghai are up an average 0.4 percent, with copper prices up one percent at Rmb 42,400, aluminium is little changed, while lead and zinc are up around 0.3 percent. The fact copper is up the most suggests short-covering. (Recent CFTC data showed short-covering on Comex and we wait to see today’s LME commitment of traders report for last week).
Spot copper in Changjiang is up 1.4 percent, which suggests it is not all short-covering as there has been some physical buying interest too. The spread with the futures has swung back into a backwardation of an equivalent to some $32 per tonne and the LME/Shanghai copper arb ratio is around 1 to 7.27, which implies the arb window is closed.
The Euro Stoxx 50 dipped 0.2 percent and the Dow closed up 0.8 percent, while Asia this morning is generally negative with the Nikkei and Hang Seng off 0.7 percent, the CSI 300 is little changed and the Kospi is off 0.4 percent.
At the currency front, the dollar index climbed to 98.14, the highest since September 2003, when the index was falling from the peaks around 121 seen in 2001 and 2002. The euro is last at 1.0791, sterling is at 1.5077, the yen is at 121.83, the aussie is at 0.7645, the rand (12.1656) and real (3.1378) continue to suffer, while the rouble is firmer at 59.83 as is the yuan at 6.2630. So while gold is under pressure against the stronger dollar, we do wonder whether those suffering currency weakness may start to look at gold as a currency hedge.
As of economy news, the agenda is busy. Released data has shown China’s
CPI climbing 1.4 percent, while PPI dropped 4.8 percent – the 36th
month of decline, but the data is likely to have been skewed by the
Chinese Lunar New Year.
Later, market pleayers expect the data on French and Italian
industrial production and US data includes: the NFIB small business
index, job openings data and wholesale inventories.
In addition, there is a Ecofin meeting and Bank of England Governor MarK Carney and UK Monetary Policy Committee member Ian McCafferty are speaking – see table below for more details.
Copper still seems to be looking slightly upbeat, prices paused for breath last Thursday and Friday, but found fresh energy yesterday. The rest of the metals are looking brighter too, to varying degrees, with lead, nickel and tin extending gains, while aluminium and zinc got some lift yesterday. Given the strength of the dollar is acting as a headwind, the metals’ performance looks encouraging.
The precious metals are under pressure with platinum leading the retreat with prices at fresh five year lows, while gold has breached $1,160 so is not too far from the $1,131.60 low from last November. Silver is following, while palladium has been dragged down from multi-month highs by the weakness in the other precious metals. Given that US rate hikes and a strong dollar have been on the agenda a long time, we are surprised by the extent of gold’s reaction, especially as the downward spiral in many currencies could well create risks of their own. As such, we feel this pullback in gold is an initial reaction, but a secondary reaction may well end up being bullish.
