Gold prices look well placed

FastMarkets

Base metals prices are little changed this morning, Friday May 26, with three-month prices on the London Metal Exchange up an average of 0.2%.

Nickel and lead prices, the two weakest metals of late, are up 0.4%, zinc prices are up 0.3% and aluminium and tin prices are little changed, while copper prices are off 0.2% at $5,719 per tonne. Volume has been light with 4,237 lots traded.

This follows a mixed performance on Thursday that saw nickel prices fall 0.9%, zinc prices decline 0.6% while the rest had gains of between 0.4% and 0.6%.

The precious metals prices are firmer by an average of 0.3% this morning, led by a 0.6% rise in platinum price to $950.90 per oz, gold prices are up 0.2% at $1,258.09 per oz. On Thursday, palladium prices rebounded 0.8%, to $771 per oz, while the rest were down between 0.1 and 0.2%.

Base metals prices trading on the Shanghai Futures Exchange are split three-ways. Nickel and zinc prices are down either side of 0.8%, aluminium and lead prices are up 0.5%, while copper and tin prices are little changed with copper prices at 45,910 yuan ($6,669) per tonne. Spot copper prices in Changjiang is up 0.1% 45,790-45,890 yuan per tonne and the LME/Shanghai copper arb ratio is weaker at 8.03.

September iron ore prices on the Dalian Commodity Exchange remain weak with prices down 0.9% today at 453 yuan per tonne, while on the SHFE, steel rebar prices are down 1.9%, gold prices are off 0.2% and silver prices down 0.1%.

In international markets, spot Brent crude oil prices fell on Thursday after Organization of the Petroleum Exporting Countries (OPEC) ministers agreed to extend the production cuts for another nine months, but decided against extending it for longer, which disappointed the market. This morning prices are off 0.2% at $51.20 per barrel. The yield on the US ten-year treasuries is little changed at 2.25%.

Equities were mixed on Thursday with the Euro Stoxx 50 closing down 0.1% and the Dow closed up 0.3% at 21,082.95. Asia, however, is weaker with the ASX 200 down 0.7%, the Nikkei is off 0.6%, the CSI 300 is off 0.1%, the Hang Seng is little changed and the Kospi is bucking the trend with a 0.6% gain.

The dollar index at 97.32 is consolidating recent weakness, the recent low was 96.79, seen on Monday May 22. With the dollar looking heavy further weakness seems likely, which may well help support metals prices. The euro is also consolidating at 1.1194, the Australian dollar is weaker at 0.7430, as is the sterling at 1.2869, while the yen is firmer at 111.44.

The yuan is strengthening, it was recently quoted at 6.8446, as is the ringgit, while the other emerging market currencies we follow are trading sideways, with a slight stronger bias.

Japan’s economic data this morning showed firmer a CPI reading, although services PPI was slightly lower than expected. Data out later is focused on the USA and includes durable goods orders, preliminary GDP and GDP prices and revised University of Michigan (UoM) consumer sentiment and inflation expectations. See table below for more details.

Aluminium and copper are the base metals looking the strongest as prices gradually work higher, while zinc and tin prices are consolidating recent gains and lead and nickel remain under pressure. Nickel prices continue to look vulnerable, while the rest of the metals look well placed to work higher, especially lead that is looking oversold. With long weekends in the UK and USA, trading is likely to be subdued unless interested parties try to take advantage of the likely low liquidity to give prices a push.

Gold prices are consolidating and are holding up well as they do. We wait to see if resistance at $1,265 per oz is overcome, which could then lead to a challenge of the April highs. Silver and platinum prices are mapping gold’s performance, while palladium prices are consolidating after their earlier correction – we wait to see if a base is in place, or whether there will be another down leg.

Metal Bulletin publishes live futures reports throughout the day, covering major metals exchanges news and prices.

 

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