Base metals prices forge ahead

The bull charge continues in base metals and has been further fuelled by a pullback in the dollar . On Friday, November 25, base metals prices closed up with gains averaging 2.5%, although those were skewed by an 8.6% climb in lead prices and a 5.1% gain in zinc prices. Tin prices closed down 1% and copper prices closed up 1% at $5,919 per tonne. Gold prices were little changed on Friday, they closed down 0.2% at $1,283.95 per oz, silver prices closed up 1%, palladium prices were up 1.4% and platinum prices were off 1.3%.

This morning, the base metals are up an average of 1.7%, volume is high with 20,711 lots traded as of 06:44 GMT, zinc and lead prices continue to power ahead with gains of 2.8% and 3.2% respectively, copper prices are up 1.7% at $6,017 per tonnez, nickel prices are up 1.6%, aluminium prices are 0.6% firmer, while tin prices are little changed at $21,110 per tonne. The weaker dollar is helping to underpin the precious metals prices where gains average 1.2% – spot gold prices are up 0.7% at $1,192.17 per oz.

In Shanghai, the January contracts are up across the board with gains of between 7% for lead and zinc prices and 0.4 percent for aluminium prices. Copper prices are up 2.1% at Rmb 49,280 per tonne. Spot copper in Changjiang is up 1.2%, suggesting the rally in the futures has continued after physical prices were set, the spot to January spread has as a result moved out to an equivalent of $80 per tonne contango and the LME/Shanghai copper arbitrage window should be open with the ratio at 1:8.19.

In other metals in China, SHFE January steel rebar prices are up 5.6%, gold prices are up 1% and silver prices are up 2.1%. In international markets, spot Brent crude oil prices are up 0.1% at $47.16 per barrel.

Equities were upbeat on Friday with the Euro Stoxx50 and Dow closing with gains of around 0.3% and Asia has varied between the Nikkei being down 0.1% – the stronger yen weighing on prices and the Hang Seng that is up 1%.

In FX, the dollar index has fallen to a low of 100.63 this morning, although it was recently quoted at 100.95, the euro is firmer at 1.0644, as are sterling at 1.2498, the yen at 112.06 and the aussie at 0.7478. The yuan at 6.9018 is rebounding as are the other emerging currencies we follow – led by the rand.

It is a quiet day on the economic data front with EU M3 money supply and private loads data out, plus ECB President Mario Draghi is speaking. Later this evening there is Japanese data out on household spending, unemployment rate and retail sales – see table below for more details.

The rallies in the base metals remain vibrant and the extent of the moves since the week before LME Week suggests a significant change of sentiment is underway and more traders are having to join in the rally even if they do not faith in it. We have been bullish on the fundamentals for most of the metals for a considerable time, but we are now less bullish on prices at these prices. The danger is that if the rallies are primarily being fuelled by fund buying then once the funds have accumulated what they want then the buying may dry up, while producer selling may continue.

The precious metals have fallen out of favour in recent weeks as the strength of other markets have provided more opportunity. However, with a lot of significant political uncertainty lying ahead, we expect bargain hunting in gold to support prices as gold should provide a good hedge against fallout from what political policy changes lie ahead, as well as from any correction that gets underway in these super-charged markets.   

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Source: Bullion Desk News