MORNING VIEW: Base metals prices looking stronger again as dollar slips; oil, gold also firmer

With the exception of tin, base metals prices on both the London Metal Exchange and Shanghai Futures Exchange were firmer this morning, Tuesday February 9, as were the precious metals and oil, while the US dollar continued with its recent pullback.

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Base metals
The LME three-month tin price retreated from recent multi-year highs and was recently quoted at $22,860 per tonne, down by 0.5% from Monday’s close. The rest of the complex was up between 0.1% for lead ($2,077 per tonne), and 1.3% for zinc ($2,677.50 per tonne). Nickel was up by 1.1% at $18,390 per tonne, while aluminium and copper were up by 0.6% and 0.5% at $2,039.50 per tonne and $8,114.50 per tonne respectively.

The most-traded base metals contracts on the SHFE were for the most part stronger, the April contract on tin was down by 1.9%, while the rest of the base metals were up by an average of 1.2%, with March copper up by 1.5% at 59,480 yuan ($9,214 per tonne).

Precious metals

Precious metals were up across the board by an average of 1.2%, but this was once again skewed by a 2.5% rise in platinum to $1,186.50 per oz. Palladium was up by 1.1% at $2,358.80 per oz, with gold and silver up by 0.5% and 0.6% at $1,840.06 per oz and $27.40 per oz respectively.

Wider markets
The yield on US 10-year treasuries has edged lower and was recently quoted at 1.16% this morning, down from 1.18% at a similar time on Monday.

Asian-Pacific equities were mixed this morning: the Hang Seng (+0.46%), the CSI (+1.83%) and the Nikkei (+0.4%), while the Kospi (-0.21%) and the ASX 200 (-0.86%) were weaker.

Currencies
The US Dollar Index extended lower this morning having started to show weakness last Friday, it was recently quoted at 90.73. On Friday, it reached a high of 91.60.

The other major currencies were up this morning in the face of the weaker dollar: the euro (1.2079), the yen (104.86), the Australian dollar (0.7722) and sterling (1.3778).

Key data
Data already out on Tuesday showed the UK retail sales monitor, as compiled by the British Retail Consortium, climbed by 7.1% year on year in January, compared with a 4.8% rise previously. And, Japan’s preliminary machine tool orders climbed by 9.7% year on year in January, after a 9.9% rise in December.

Out later, there is data on Germany’s trade balance, Italian industrial production, with US data on the National Federation of Independent Business’ small business index, job openings and mortgage delinquencies.

Today’s key themes and views
The metals continue to look more upbeat and seem to be eyeing their recent highs, although some will have further to travel than others. Tin led the latest move higher on the LME with it setting fresh multi-year highs and a record cash/three-month backwardation a week ago after stocks had fallen to ultra-low levels. The copper spread is also backwardated while exchange stocks fall to low levels, so a run-up to fresh highs seems likely too.

But with China’s Lunar New Year holidays starting on Thursday, it will be interesting to see whether the stronger momentum lasts through the holiday. LME prices have generally been stuck in sideways-to-down trends for varying lengths of time - if these turn out to be continuation patterns then there may be considerable upside still to come in the months and quarters ahead.

The sell-off in gold and silver attracted dip-buying and the weaker dollar seems to be helping too, but the real standout is platinum that is racing higher.




William Adams

william.adams@fastmarkets.com

Published

William Adams

February 09, 2021

08:00 GMT

London