MORNING VIEW: Metal prices have turned lower after recent strength, broader markets weaker too

Risk assets were weaker this morning, Thursday June 11, with the base metals prices on the London Metal Exchange down across the board, as were Asian-Pacific equities and pre-market major western equity index futures.

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Base metals
Three-month base metals prices on the LME were down between 0.4% for zinc ($2,021 per tonne) and 1.2% for both copper ($5,832 per tonne) and nickel ($12,850 per tonne).

The price weakness has been seen amidst increased trading volume with 8,530 lots traded as at 6.39am London time, compared with an average of 5,700 lots at a similar time each day last week.

While the LME metals are weaker, the most-traded base metals contracts on the Shanghai Futures Exchange were mixed, reflecting that some of the metals opened higher while they reacted to the strength on the LME on Wednesday. The July contracts for copper, zinc and aluminium were up by 0.9%, 0.1% and 0.4% respectively, with copper recently quoted at 47,020 yuan ($6,653) per tonne. But July lead and the August contracts for nickel and tin were down by 1%, 0.9% and 0.4% respectively.

Precious metals
Gold prices were weaker this morning with spot prices off by 0.4% at $1,728.90 per oz, but this comes after a second day of strength on Wednesday that saw prices rise by 1.3%, to close at $1,735.80 per oz.

Silver ($17.84 per oz) and platinum ($823 per oz) were both down 1.1%, while palladium (1,934.50 per oz) was little changed.

Wider markets
As we highlighted on Wednesday, the lower yield on the US 10-year treasuries suggested a pick-up in haven demand and that seems to have increased with the yield falling to 0.71% this morning - this after 0.81%, 0.85% and 0.9% at a similar times on Wednesday, Tuesday and Monday morning respectively. It also helps explain why gold and the yen are stronger.

Asian-Pacific equities were weaker this morning: the ASX 200 (-3.05%), the Kospi (-0.86%), the Nikkei (-2.82%), the Hang Seng (-1.81%) and China’s CSI 300 (-1.13%).

The US dollar index was consolidating this morning and was recently quoted at 96.31, this after a low of 95.71 on Wednesday.

Most of the other major currencies were also consolidating off recent highs: the euro (1.1352), the Australian dollar (0.6932) and sterling (1.2678), while the yen (107.09) remains strong.

Key data
Thursday’s key data that is already out showed Japan’s business survey index on manufacturing collapsed to -52.3 in the first quarter of the year, it had been expected to fall to -20.5. Data out later includes Italian industrial production as well as US producer price index, initial jobless claims and natural gas storage.

There are also Eurogroup meetings taking place today.

Today’s key themes and views
We said on Wednesday that the base metals may be running ahead of the fundamentals and it does now look as though some consolidation is underway this morning, so we wait to see where support lies on the downside. With equities also looking weaker, we would not be surprised to see prices fall further.

Gold prices have run higher in recent days and if risk-off is being seen in broader markets then gold may well have the energy to tackle resistance at $1,745 per oz and $1,751 per oz.

William Adams


William Adams

June 11, 2020

08:48 GMT