Gold prices consolidate, may face headwinds

FastMarkets

The precious metals are mixed this morning, Monday May 22,  with platinum and gold prices down 0.2% – spot gold prices were recently quoted at $1,252.96 per oz – while silver prices are up 0.3% and palladium prices are up 0.2%. This comes after a strong performance on Friday when prices closed up an average of 0.7%, led by a 1.5% gain in spot silver prices to $16.84 per oz.

The base metals on the London Metal Exchange are consolidating this morning, with prices down an average of 0.7%, although that is skewed by a 3% decline in three-month nickel prices to $9,085 per tonne. The rest are down an average of 0.4%, except tin prices which are little changed.

Volume has been higher than of late with 7,636 lots traded as of 06:44 BST.

This comes after an outright bullish day on Friday when prices closed up an average of 1.9%, but intraday at the highs, prices were up between 1% for tin and 3.6% for zinc, with lead and nickel up either side of 3%.

In Shanghai this morning, most of the base metals trading on the Shanghai Futures Exchange are stronger, the exception is aluminium which is off just 0.1%, while the rest are up between 1% for tin and 4.3% for zinc prices. Copper prices are up 1.4% at 45,760 yuan per tonne. Spot copper prices in Changjiang are up 1.3% at 45,710-45,860 yuan per tonne, while the LME/Shanghai copper arb ratio is little changed at 8.08.

Steel rebar prices on the SHFE are up 4.8% and September iron ore prices on the Dalian Commodity Exchange are up 4.5% at 495.50 yuan per tonne, while gold prices are little changed and silver prices are up 0.4%.

In international markets, spot Brent crude oil prices are up 0.3% at $53.97 per barrel, as Saudi Arabia signals that oil producers have agreed to extend supply cuts. The yield on the US ten-year treasuries is a little firmer at 2.25%.

Equities were stronger on Friday with the Euro Stoxx 50 and Dow closing up 0.7%, with the latter at 20,804.84. Asia has been stronger for the most part today with the Nikkei up 0.5%, the Hang Seng is up 0.9%, the ASX 200 is up 0.8%, the Kospi is up 0.6%, while the CSI 300 is off 0.1%.

The dollar index continues to trend lower, it was recently quoted at 97.23 – having reached a low of 97.08 on Friday. Conversely, the euro is consolidating at 1.1195 after Friday’s fresh high of 1.1212, the sterling is at 1.2989, the yen is at 111.39 and the Australian dollar is at 0.7442. The weaker dollar should help underpin commodity prices.

The yuan is firmer at 6.8792, the Brazilian real at 3.2551 is recouping some of last week’s politically-induced losses and the other emerging market (EM) currencies are generally firmer, which suggests a degree of confidence in the broader markets.

The economic agenda is fairly light on the data front with UK house prices, Japan’s trade balance, a monthly report from the Bundesbank and Chinese leading indicators, but there is a Eurogroup meeting and US Federal Open Market Committee (FOMC) members Patrick Harker and Neel Kashkari as well as UK prime minister Theresa May are speaking. See table below for more details.

The underlying tails on base metals prices on Thursday’s candlesticks showed dip-buying emerged and that flowed through to further buying on Friday, which helped reduce the vulnerable feel to the markets that was evident earlier last week. It would appear that copper, aluminium, zinc, tin and nickel prices are all looking stronger now, while laggard lead remains vulnerable. Prices still have more work to do on the upside before they will look bullish again, but they also look well placed to move higher. The weaker dollar should also help underpin a firmer tone.

Gold prices are consolidating the gains seen on the latest run-up in political uncertainty in the USA, but rebounding equity markets and stronger industrial metals may act as a headwind for prices. A rebound in oil prices and a weaker dollar may underpin stronger investment demand for commodities in general, which could include gold. Silver and platinum are following gold’s lead, while weaker palladium prices seem to be reflecting profit-taking on the back of high prices of late and concerns over a weaker outlook for the auto industry.

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

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