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November 2021 | Base Metals


Base metals prices mixed but mainly stronger on recent positive data

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Most base metals on the London Metal Exchange were extending their rebounds on the morning of Thursday November 25, with the main driver appearing to be the robust economic data that has been released so far this week.

• US Dollar Index remains elevated, as do US treasury yields
• Markets off to a quiet on Thursday morning with the US closed for the Thanksgiving Day holiday

Base metals
Most of the three-month base metals prices on the LME were higher on Thursday morning, apart from tin, which was down by 0.1% at $39,850 per tonne. The rest were up by an average of 0.4%.

Copper was up by 0.4% at $9,886.50 per tonne.

The most-traded base metals contracts on the Shanghai Futures Exchange were also - for the most part - stronger, the exception being the January lead contract, which was down by 0.1%.

The other contracts were up by an average of 1.6%, with the market catching up with the strong performance on the LME on Wednesday when the base metals contracts closed higher by an average of 1.3%.

Precious metals
Spot gold, at $1,792.85 per oz, was up by 0.2% after a third day of weakness on Wednesday - when the price fell 1.1%. The other precious metals were up by an average of 1.7%, but that was after an average loss of 3.8% on Wednesday.

Wider markets
The yield on US 10-year treasuries were holding at the relatively high level of 1.63% on Thursday morning, unchanged from a similar time on Wednesday.

Asia-Pacific equities were mixed on Thursday morning: the Nikkei (+0.68%), the ASX 200 (+0.11%) and the Hang Seng (+0.28) were stronger, while the Kospi (-0.47%) and the CSI 300 (-0.42%) were weaker.

Currencies
The US Dollar Index was holding up in high ground on Thursday morning at 96.72, compared with 96.48 at a similar time on Wednesday.

Other major currencies - the euro (1.1216), the Australian dollar (0.7202), sterling (1.3345) and the Japanese yen (115.40) - were consolidating in low ground this morning after Wednesday’s weakness

Key data
Economic data out already on Thursday showed Germany’s final gross domestic product for the third quarter at 1.7%, down from an earlier reading of 1.8%, but up from 1.6% in the second quarter. German GfK consumer climate index dropped to -1.6 in November, from 1 in October.

Later on Thursday, the European Central Bank will release the minutes from its recent monetary policy meeting. ECB president Christine Lagarde, Bank of England governor Andrew Bailey and United Kingdom Monetary Policy Committee Jonathan Haskel are scheduled to speak.

Thursday’s key themes and views
Dip buying/bargain hunting are having a positive effect on base metals prices and recent, robust economic data seems to be the driving force. Once again. we note iron ore prices in China are on the rise and China seems to be attempting to boost growth again, having had its foot on the brakes over the summer.

Precious metals have been hit hard this week, especially palladium, which set a fresh low for the year.

Gold has wiped out all the gains from the first half of this month. The weakness in gold seems to be a result of the strength of the dollar, treasury yields and the market getting more hawkish about the speed of tapering. We wait to see if the US central bank actually keeps up with expectations or remains cautious in case there is another wave of Covid-19 in the country over winter.