Silver prices storm through $20/oz

The precious metals also put in strong performances on Friday with average gains of 2.5 percent, led by a 5.4 percent rally in silver prices, while gold prices were up 1.4 percent at $1,341.15. This morning, prices are up 1.6 percent, with silver again in the lead with a 3.7 percent rally to $20.50, it has been as high as $21.10.

Speculative/fund buying that gathered momentum last week led to strong gains on Friday with the base metals up an average of 2.5 percent, led by a 5.5 percent rise in nickel that reached a high of $10,000, making it the second metal to set a fresh high for 2016. This morning the metals are up a further 0.5 percent, with gains seen across the board with tin up 1.3 percent at $17,595, which makes it the third metal to set a fresh high for the year. Now zinc, nickel and tin as setting the tone – the common tie between these metals is they are all used with steel to make galvanised steel, stainless steel and tin-plate. Copper is up 0.9 percent at $4,948. Volume this morning is strong with 9,670 lots traded.

In Shanghai, the base metals are up an average of 2.3 percent with tin up six percent, while copper is up 2.4 percent at Rmb 38,270. Spot copper is up 2.2 percent at Rmb 38,160-38,360, the spread with the futures is at an equivalent of $13 backwardation, while the LME/Shanghai copper arb ratio is at 7.73.

In other metals in China, iron ore in Dalian is up 4.9 percent at Rmb 441.50, steel rebar is up 3.5 percent, gold is up two percent and silver prices are up six percent. In international markets, Brent crude is last at $50.68. With all the other commodities racing higher oil prices are somewhat subdued.

Equities have been working higher, the Euro Stoxx 50 closed up 0.6 percent on Friday and the Dow closed up 0.1 percent. Asia is upbeat this morning with the Nikkei up 0.5 percent, the Hang Seng is up 1.6 percent, the CSI 300 is up 1.5 percent, the ASX 200 is up 0.5 percent and the Kospi is up up 0.4 percent.

In FX, the dollar index is drifting, last at 95.61, sterling remains weak at 1.3288, the euro is edging higher at 1.1138,  the aussie is firm at 0.7516 and the yen is last at 102.63. The yuan is weak at 6.6764 and the other emerging market currencies we follow are firm, suggesting they are not too concerned about fall-out from Brexit, especially as it may mean the Fed remains on hold for longer.

The economic calendar is light with Spanish unemployment change, EU Sentix investor confidence, UK construction PMI, EU PPI and no US data as it is the 4^th July holiday.

The rally in the base metals continues and they are looking robust. With the physical market quiet, the driving force seems to be fund/investment driven on the back of expectations that China will provide more stimulus to the economy. With zinc, nickel and tin all extending this year’s gains it remains to be seen if the other metals follow suit. For now we would run with the trends as Brexit seems to be in a ‘calm before the storm phase’ and that may last for a number of months, but the run up in safe-havens, gold, silver and yen, suggests there is fear in the market.

Gold and silver prices are racing higher on the back of fund buying/short-covering, but in gold and silver the funds longs look over extended, so prices may be getting overbought and overdue a correction.

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Source: Bullion Desk News