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January 2022 | Base Metals


Base metals prices mixed as markets consolidate after increased volatility, ahead of Fed decision

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Base metals prices on the London Metal Exchange and Shanghai Futures Exchange were mixed on the morning of Wednesday January 26, with the metals consolidating after broad market corrections and while traders wait to see whether the US Federal Reserve’s tone on tightening changes when it releases a statement later today.

* Western equity index futures point to higher openings this morning.
* Geopolitical concerns about the stand-off between Russia and Ukraine remain firmly in place.

Base metals
Three-month base metals prices on the LME were mixed this morning, with copper ($9,800 per tonne) down the most with a 0.5% drop. Zinc ($3,579 per tonne) was also weaker, dropping by 0.2%, while the tin ($41,600 per tonne) was up by 0.3% and the rest were all up by 0.1%. Despite recent pullbacks, all in all the metals have held up relatively well so far.

The March contracts for the base metals on the SHFE were also mixed. Aluminium led on the upside with a 2% gain and copper was up by 0.4% at 70,130 yuan ($11,077) per tonne. Nickel and lead were down by 0.8% and 0.6% respectively, while zinc and tin were little changed.

Precious metals were mainly weaker on Wednesday, the exception was platinum that was up by 0.3% at $1,032 per oz. The rest were down, led by a 0.5% fall in silver ($23.76 per oz), with palladium off by 0.2% at $2,191.50 per oz and gold off by 0.1% at $1,848.19 per oz. Despite the slight weakness in gold this morning, the overall trend is upward considering prices have come up from around $1,783 per oz as recently as January 7.

Wider markets
The yield on US 10-year treasuries has edged higher, suggesting slightly less haven demand; it was recently at 1.77%, up from 1.75% at a similar time on Tuesday.

Asia-Pacific equities were mainly weaker on Wednesday: the Kospi (-0.41%), the Hang Seng (-0.16%) and the Nikkei (-0.44%), while China’s CSI 300 (+0.29%) bucked the trend.

Currencies
The US Dollar Index is consolidating on Wednesday morning and was recently at 95.97, compared with 95.95 at a similar time on Tuesday. This evening’s Federal Reserve decisions and comments may well set the next direction.

Other major currencies were for the most part consolidating but slightly firmer: the euro (1.1301), the Australian dollar (0.7158) and the Japanese yen (113.92), while sterling (1.3508) was stronger.

Key data
Key economic data out Wednesday includes US data on the goods trade balance, wholesale inventories, new home sales and crude oil inventories.

The data will be followed by the Federal Open Market Committee (FOMC) statement, rate decision and press conference.

Wednesday’s key themes and views
Once again, where dips have been seen in the base metals prices dip-buying has emerged. Nickel and tin have been the more volatile metals, but they had been the more energetic metals on the way up so it is not surprising they pulled back the most. Overall, there seems little appetite to reduce exposure too much across the metals.

In this current climate of geopolitical tensions, inflation and market nervousness, gold continues to be supported.