MORNING VIEW: LME base metals - another rebound after another shake-out

Base metals prices on the London Metal Exchange were mainly weaker on the morning of Wednesday August 25, although they had previously rebounded from last week’s weakness.

Shanghai Futures Exchange base metals prices were mainly stronger on Wednesday in response to the previous day’s gains on the LME.
  • Broader markets focused on Friday’s United States Federal Reserve Jackson Hole symposium
  • Spread of the Delta variant of Covid-19 has bullish and bearish implications for metals
  • ... bearish because it leads to slower economic activity and bullish because it further threatens supply chains

Base metals
LME three-month base metal prices were mainly weaker in morning trading, with the exception of aluminium ($2,609.50 per tonne) that was up by 0.2%. The rest were down by an average of 0.2%, consolidating after the rebounds across most of the metals on Monday and Tuesday. Copper was down by 0.3% at $9,332.50 per tonne, but is back above the support line of $9,288 that was breached last week.

The most-active base metals contracts on the SHFE were largely stronger in morning trading; the exception was October lead, which was down by 0.4%, while the rest were up by an average of 1.4%, led by a 2.3% rise in September tin. October copper was up by 1% at 69,160 yuan ($10,674) per tonne.

Precious metals
Spot precious metals prices were down across the board by an average of 0.8%, with the platinum group metals down by around 1.1%. Gold and silver prices were both down by 0.4% at $1,795.49 per oz and $23.70 per oz respectively.

Wider markets
The yield on US 10-year treasuries was recently at 1.29%, compared with 1.28% at a similar time on Tuesday.

Asia-Pacific equities were mixed: the Nikkei (-0.03%), the ASX 200 (closed), the Hang Seng (-0.53%), the CSI 300 (+0.04%) and the Kospi (+0.27%).

Currencies
The US dollar index has pulled back from Friday’s high at 93.73 and was recently quoted at 93.03.

The major currencies were slightly weaker on Wednesday morning: sterling (1.3717), the Japanese yen (109.85), the euro (1.1735) and the Australian dollar (0.7245).

Key data
Economic data scheduled to be out on Wednesday includes Germany’s Ifo business climate, United Kingdom realized sales, US durable goods and US crude oil inventories.

Wednesday’s key themes and views
Once again, the metals have shrugged off recent weakness, evidenced by the rebounds that got under way for most of the metals on Monday, with follow-through gains on Tuesday. The charts for copper and tin look the most damaged by last week’s sell-offs, while the rest seems to be generally consolidating, although aluminium continues to look robust. While the spread of the Delta variant is slowing down economic activity, for the metals it is also further disrupting supply lines and that may mean users feel the need to hold more stock, which is likely to be supportive. The spread of the delta wave may also end up affecting more mining operations too.

After the extreme volatility in gold between August 6 and August 9, prices have rebounded strongly, but gold now faces resistance up to $1,840 per oz. Silver has struggled to recover to the same extent as gold, as seen by the gold/silver ratio being around 1:76, having oscillated either side of 1:68 for most of the second quarter.

William Adams

william.adams@fastmarkets.com

Published

William Adams

August 25, 2021

10:12 GMT

London