Metals attempting a rebound, helped by stronger oil and weaker dollar

Base metals were mixed yesterday with copper showing strength with a two percent gain to $4,676, zinc was up 0.6 percent, while the rest were lower by between 0.6 and 0.8 percent. Precious metals were generally weak with gold prices setting a low at $1,217.90, before closing down 0.4 percent at $1,222.90. The other precious metals closed off their lows, so we now need to see if there is follow through dip-buying.

This morning, the base metals are for the most part higher, led by a 0.7 percent rise in zinc to $1,851.50, nickel is up 0.5 percent while copper is up 0.2 percent at $4,686. Tin is off 0.3 percent. LME volume has picked up to 5,680 lots.

Precious metals are rebounding, average gains are 1.2 percent, led by a 1.9 percent rally in palladium to $540.30, platinum is up 1.2 percent, silver is up one percent and gold prices are up 0.6 percent at $1,229.70.

In Shanghai, the metals are quite polarised with copper up 1.1 percent at Rmb 35,900, while aluminium is down 1.3 percent. Zinc is up one percent, tin is up 0.5 percent, while nickel and lead are down around 0.3 percent. Spot copper is up 0.8 percent at Rmb 35,790-35,990, the spread is at an equivalent of $14 per tonne back, but the LME/Shanghai copper arb ratio is slightly weaker at 7.66.

In other metals in China, iron ore prices are weaker with prices on the Dalian exchange down two percent at Rmb 340.50 ($51.93), steel rebar up 0.2 percent, gold prices are off 0.2 percent, while silver is up 0.8 percent. In international markets, Brent crude prices have touched $50, last $50.10, which is the highest this year. The latest pick-up in price was on the back of the bigger than expected fall in US inventories that fell 4.2 million barrels, they were expected to fall 1.7 million barrels.

Equities are stronger too on the back of the firmer oil price and also as the market is encouraged that the US economy seems strong enough to support, sooner rather than later, a US rate rise. The Euro Stoxx 50 closed up 1.7 percent yesterday and the Dow closed up 0.8 percent, but Asia is more mixed, with the Nikkei up 0.5 percent, the Hang Seng is off 0.2 percent, the CSI 300 is down 0.8 percent, the ASX200 is up 0.3 percent and the Kospi is down 0.2 percent.

In FX – the dollar index has turned lower, last at 95.13, the euro has turned higher at 1.1186, sterling is firm at 1.4712 and is approaching the early May highs at 1.4769, the aussie has turned higher at 0.7212 and the yen is at 109.58. Emerging market (EM) currencies have been trending lower, but they are seeing some short-term strength, which supports the view that the market is turning a bit more risk on.

On the data front, Japan’s SPPI is up 0.2 percent, later there is data out on Italian retail sales, UK data includes a second estimate of GDP, business investment, mortgage approvals and index of services. US data includes durable goods orders, initial jobless claims, pending home sales and natural gas storage. In addition, there is a G7 meeting and FOMC members James Bullard (hawk) and Jerome Powell (neutral) are speaking.

We have viewed the price pull back as a profit-taking/counter trend move after the strong January to May rallies, so we wait to see if the developing firmer tone over the past 24-hours gathers momentum, or are they just another dead-cat bounce, which we have seen a number of in recent weeks. The stronger oil should help underpin commodities, so should the dollar if it continues to retreat. It seems odd that the dollar is weakening just as the market seems to be accepting the more hawkish tone from FOMC members.

Gold prices are attempting a rebound, they have pulled back 6.6 percent from the early May highs, but yesterday’s low did hold above the late-March low of $1208.50. Like the base metals, we have viewed the recent weakness as a profit-taking sell-off within a bull market, so we would not be surprised if dip buying is already returning. That said, the gross fund long position was very extended and we doubt the 6.6 percent pull-back in price has been enough to absorb much profit-taking so there could still be more profit-taking, which may mean prices trade sideways for a while. 

The post Metals attempting a rebound, helped by stronger oil and weaker dollar appeared first on The Bullion Desk.

Read More
Source: Bullion Desk News