BASE & PRECIOUS METALS - European Morning View - Gold leads the retreat, base metals still holding up

By: William Adams

London 15/02/2013 -The metals had a choppy day’s trading yesterday; especially silver that was up one percent at the days’ highs and was off 1.5 percent at the day’s lows,  it closed down 1.2 percent. Aluminium was one of the stronger metals closing up 0.6 percent at $2,152, while copper closed unchanged at $8,237.50. GDP data in Japan and Europe disappointed the market, although better US initial jobless claims provided some relief, albeit only for a while.

This morning the metals are opening up in Europe mixed, aluminium and zinc are up 0.6 percent and 0.4 percent respectively, tin is down 0.4 percent and copper is up 0.1 percent at $8,246, while the others are unchanged. Volumes remain light with 1,214 lots traded as of 07:09 GMT. Precious metals have bullion off 0.1 percent, platinum down 1.1 percent at $1,690, while palladium is up 0.3 percent. The lows on gold and silver have been $1,630 and $30.26.

The mood in Asian equities this morning has been mixed, the Nikkei is down 1.2 percent as the yen has been strengthening ahead of the G20 meeting, the Hang Seng is little changed, while the MSCI Asia Apex is up 0.3 percent, with the Kospi up 0.1 percent and the Indian Sensex down 0.3 percent. These follow down days yesterday in Europe where the Euro Stoxx 50 was off 0.8 percent and the Dow closed down 0.1 percent.

Currencies seem to be consolidating after recent gyrations with the euro at 1.3375, after yesterday’s low of 1.3312. The dollar index is drifting again, last at 80.27 after yesterday’s high at 80.62, the yen is recovering it is at 92.50, the recent high being 92.21, while cable is trying to rebound, last at 1.5531, after a low of 1.5471 and the aussie is firmer at 1.0367.  The G20 meeting in Moscow starts today so the markets are likely to remain edgy, although we doubt much will come of it as a good proportion of the group have been dabbling in various forms of QE so it may be a bit rich to take a strong stance against weaker currencies.

On the economic front Japan’s industrial production grew 2.4 percent, slightly below expectations, later we get Italian and EU trade balance data, UK retail sales and in the US: the Empire State manufacturing, TIC data, industrial production and capacity utilisations and the University of Michigan consumer sentiment and inflation expectations – see table attached for more details.

The base metals remain in consolidation mode – they seem to be capped by overhead selling, which is not surprising given prices are up in the multi-month high ground, but dips are being well supported. Aluminium is the metal showing most strength which is interesting considering premiums are at or near record highs. By comparison, the precious metal are under pressure with gold leading the way, followed by silver and even platinum is now pulling back, which suggests palladium may follow.

What will be interesting is whether the base metals follow the precious metals lower - we think they may. Needless to say with China being out all week, we should not read too much into this week’s action until we get a feel for what sentiment is like in China post-lunar New Year and ahead of the seasonally strong second quarter.

Metals Overnight Performance
GMT7:09 AM+/-+/- %Lots
Steel 33000.0%Total lots
 Average (BM ex-Steel)0.1%1214
 Average PM-0.2% 



JapanRevised Industrial Production m/m2.4%2.5%2.5%
5:00amJapanBOJ Monthly Report   
Day 1ALLG20 Meetings   
 9:00amEU Italian Trade Balance 2.22B2.36B
9:30amUKRetail Sales m/m 0.5%-0.1%
10:00amEU Trade Balance 10.7B11.0B
1:30pmUS Empire State Manufacturing Index-2.1-7.8
2:00pmUS TIC Long-Term Purchases 34.3B52.3B
2:15pmUS Capacity Utilization Rate 78.9%78.8%
2:15pmUS Industrial Production m/m 0.2%0.3%
2:55pmUS Prelim UoM Consumer Sentiment74.871.3
2:55pmUS Prelim UoM Inflation Expectations 3.4%