BASE & PRECIOUS METALS - European Morning View - Copper well placed to break out, gold trying higher too

By: William Adams

London 30/01/2013 - Metals held on to a good proportion of their gains yesterday, which was quite an achievement given recent performance. Base metals closed up an average of one percent with copper up 0.8 percent at $8,112.25 – nickel, lead, zinc and tin saw gains of one percent or more. The precious metals were up an average of 1.2 percent with palladium up 1.8 percent at $747. Economic news was not that great with US consumer confidence disappointing, although US house prices climbed 5.5 percent, in line with expectations.

Early trading this morning has seen prices edge higher with average gains of 0.3 percent on the base and 0.2 percent on the precious metals. Zinc is up the most with a 0.7 percent gain to $2,117 while copper is up 0.5 percent at $8,155 – the high being $8,159, so prices are attempting to erode resistance between $8,155 and $8,165. Volumes on the LME have been higher than of late with 8,251 lots traded as of 07:08 GMT.

Palladium is up 0.3 percent at $749, platinum is last at $1,681.1, while silver and gold are up 0.2 percent at $31.41 and $1,667.80.

In Shanghai the base metals are up an average of 0.8 percent with zinc leading the way with a 1.4 percent gain to Rmb 15,815, copper is up 0.9 percent at Rmb 59,050, lead is 0.5 percent firmer at Rmb 15,470 and aluminium is up 0.4 percent at Rmb 15,215. Rebar is 0.4 percent higher at Rmb 4,016 and gold is up one percent at Rmb 337.63.

Spot copper in Changjiang is up 0.8 percent at Rmb 58,350-58,550, so is in a large contango with the futures while the LME/Shanghai arb remains closed with the ratio out at 7.25.

Equities put in a strong performance yesterday with the Dow climbing 0.5 percent, it is now two percent from all time highs seen in October 2007 at 14,198. In Asia the Nikkei is up 2.3 percent, the Hang Seng is up 0.75 percent , the MSCI Asia Apex is up 0.7 percent and China’s CSI 300 is up 0.5 percent.

Currencies – the dollar index remains on a back footing at 79.53, the euro is strong at 1.3505, cable is attempting a rebound, last at 1.5759 after a low of 1.5670 on Monday, the aussie is also bouncing, last at 1.0467, while the yuan and the yen are looking weaker at 6.2340 and 90.98, respectively.

The economic calendar is busy today , Japan’s retail sales grew 0.4 percent, next up is Spanish GDP, followed by: EU retail PMI, a host of UK lending data, bond auctions in Germany and Italy and in the US ADP non-farm employment change, GDP, crude oil inventories and later we get Japan manufacturing PMI and industrial production. In addition, at 19:15 GMT we get the FOMC statement.

Overall we have been friendly towards the metals, they have been struggling to make headway despite generally bullish economic news and we are now not surprised that a delayed reaction seems to be getting underway – whether that can be sustained will probably depend on what the FOMC statement says this evening and what the employment report shows on Friday.

With equity markets approaching multi year and multi month highs investor confidence is strong and more of that enthusiasm might rotate into the industrial metals. For the base metals though we do not feel major bull runs are justified, however, we would not be surprised to see prices move up to higher trading ranges, but to be capped by producer selling and selling from inventory. We expect precious metals to perform well too.

Metals Overnight Performance
GMT7:08 AM+/-+/- %Lots
Steel 32500.0%Total lots
 Average (BM ex-Steel)0.3%8251
 Average PM0.2% 


Economic Agenda
JapanRetail Sales y/y0.4%0.4%1.2%
EU Spanish Flash GDP q/q -0.6%-0.3%
9:10amEURetail PMI  44.5
9:30amUKNet Lending to Individuals m/m0.9B-0.1B
9:30amUKM4 Money Supply m/m 0.2%-0.2%
9:30amUKMortgage Approvals 55K54K
TentativeEU German 30-y Bond Auction  2.34|2.7
TentativeEUItalian 10-y Bond Auction  4.48|1.5
1:15pmUS ADP Non-Farm Employment Change164K215K
1:30pmUS Advance GDP q/q 1.1%3.1%
1:30pmUS Advance GDP Price Index q/q 1.5%2.7%
3:30pmUS Crude Oil Inventories 2.9M2.8M
6:00pmEUGerman Buba President Weidmann Speaks 
7:15pmUS FOMC Statement   
7:15pmUS Federal Funds Rate <0.25%<0.25%
11:15pmJapanManufacturing PMI  45
11:15pmJapanPrelim Industrial Production m/m4.2%-1.4%