Base metals prices on the London Metal Exchange were higher across the board on the morning of Friday December 18, with copper trading above $8,000 per tonne earlier for the first time since 2013.
Infrastructure spending pledges, hopes for more stimulus, falling or low stocks and low Capex levels across the industry for several years all make for a bullish long-term backdrop for the metals.
Base metals
The three-month base metals prices on the LME were up by an average of 0.7%, led by a 1.2% gain in aluminium ($2,079.50 per tonne), while copper was up by 1% at $7,998.50 per tonne - after having briefly peaked at $8,028 per tonne.
Traded volumes have been high, with 13,056 lots traded as of 6.44am London time compared with typical averages of about 6,000 lots around that time of day.
The most-traded base metals contracts on the Shanghai Futures Exchange (SHFE) were mainly higher, with the exception of February tin, which was down 70 yuan per tonne at 154,410 yuan per tonne. The rest were up by an average of 1.6%, led by a 1.8% rise in February copper and January zinc, with the former at 59,370 yuan ($9,056) per tonne.
Precious metals
Spot gold prices were down by 0.1% but have held on to much of their recent gains, having recently been quoted at $1,881.29 per oz. Palladium prices were up by 0.5% at $2,343.50 per oz, while silver and platinum were down by 0.5% and 0.1% at $25.76 per oz and $1,041 per oz, respectively .
Wider markets
The yield on US 10-year treasuries was recently quoted at 0.91% and it has not been moving much in recent days.
Asia Pacific equities were mainly weaker this morning: the ASX 200 (-1.2%), the Nikkei (-0.16%), the Hang Seng (-0.92%) and the CSI (-0.35%), while the Kospi (+0.06%) was firmer.
Currencies
The US dollar index at 89.92 was consolidating in low ground this morning; the next obvious support level on the chart is the February 2018 low at 88.25.
Most of the other major currencies are trending higher and were holding up in high ground this morning,: the euro (1.2252), the Australian dollar (0.7604), the yen (103.34) and sterling (1.3545).
Key data
Data already out on Friday showed United Kingdom consumer confidence improved to -26 in December, from -33 in November. Key data out later includes the German producer price index and Ifo business climate, UK retail sales and industrial order expectations and the EU current account, along with US data on the current account, leading indicators and the results of the Federal Reserve’s bank stress test.
Today’s key themes and views
For now the underlying uptrends in the base metals continue and there seems little appetite for profit-taking or corrections, with any loss of momentum tending to be short-lived. Lead remains the metal that is struggling the most, which supports our view that this is a rally driven by the outlook for spending on infrastructure and electrification - neither of which are particularly strong drivers of lead demand.
Gold’s rebound, at a time when risk appetite is strong, seems to suggest that it is being pulled up as part of a broad-based commodity play, with the base metals and oil strong, all helped by a weaker dollar. We recently said we would be bearish on gold below $1,840 per oz and bullish above $1,880 per oz so we await to see if gold can break back above $1,900 per oz again.
William AdamsFastmarkets