30/03/2016 10:31 AST
The precious metals were initially weak yesterday but then got a lift from Fed Chair Janet Yellen’s dovish remarks. The complex closed up an average of 1.4 percent, led by a 2.3 percent gain in platinum, while gold prices closed up 1.9 percent at $1,239.50. The base metals were mixed yesterday falling an average of 0.9 percent, which was skewed by a 2.8 percent fall in tin and 1.5 percent falls in lead and nickel, zinc was little changed, copper was off 0.8 percent at $4,917, while aluminium bucked the trend with a one percent rise to $1,493.
This morning the base metals are generally consolidating with losses of around 0.2 percent on average, led by a 0.6 percent decline in copper to $4,887. Volume is average with 5,013 lots traded as of 06:17 BST.
Precious metals are also consolidating this morning; prices are down an average of 0.2 percent, with gold prices at $1,236.80.
In Shanghai, the base metals are down an average of 1.5 percent, with tin and nickel leading the retreat with falls of 3.3 and 2.3 percent respectively. Copper is down 1.5 percent at Rmb 37,160 while the others are down around 0.6 percent. Spot copper in Changjiang is off 0.8 percent at Rmb 37,250-37,450, the spread has reverted to a backwardation equivalent to some $44 and the LME/Shanghai copper arb ratio is at 7.6.
In other markets in China, iron ore prices in Dalian are bouncing, they were up 1.4 percent in early trading, steel rebar is down 1.9 percent, gold prices are up one percent and silver is up 0.3 percent. In international markets, Brent crude oil is last at $39.41.
Equities were given a boost by Fed Chair Janet Yellen’s remarks the Euro Stoxx 50 and Dow both closing up 0.6 percent. This morning Asia is mixed with the Nikkei off 1.2 percent, a 6.2 percent drop in the country’s industrial production data and a stronger yen are weighing on the market, the Hang Seng is up 1.4 percent, the CSI 300 is up 1.5 percent, the ASX 200 is up 0.1 percent and the Kospi is up 0.3 percent.
In FX – the dollar dived on Janet Yellen’s dovish comments, which took the market by surprise as recently FOMC members have tended to be more hawkish. The dollar index dropped to 95.11, the euro is stronger at 1.1297, as are sterling at 1.4378, the aussie at 0.7630 and the yen at 112.30. Euro sterling is last at 0.7855.
Emerging market (EM) currencies are strong, the yuan is last at 6.4827 and the others are all firm and look well placed to break higher, which the ringgit has already done. The EM currency strength seems to be due to dollar weakness, the dollar weakness is supporting precious metals, but not the base metals and that may be due to the weaker oil prices.
Economic data out today includes German CPI, there is an Italian bond auction and in the US we get ADP non-farm employment change and crude oil inventories and this evening a GfK consumer confidence reading for the UK – see table below for more details.
The fact the metals are on a back footing when the dollar has weakened suggests profit-taking ahead of month and quarter end after what have been some strong rallies. Oil prices are also easing, which suggests the same. We should get a feel for whether this is just profit-taking or the end of the bullish counter-trend move by seeing whether the dip buyers return in April. We wait to see if Friday’s barrage of PMI data and the US employment report provide any clues as to whether global economic activity is improving. Good data could well see the stronger tone in the metals return.
The precious metals were correcting lower up until yesterday’s dovish comments, but as expected the dips have attracted buying so we see the recent pullbacks as consolidation. We wait to see if gold prices can climb back above $1,250.
Bullion Desk
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