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LME METALS round-up: 7 September

Metals were steadier this week as the markets hoped for more cash injections from the US Federal Reserve (American central bank), and the European Central Bank (ECB).

Central bankers tend to make Delphic pronouncements, not least because being specific would cause trouble. Thus the Fed’s Ben Bernanke undertook to “provide additional policy accommodation as needed”

While the ECB’s Mario Draghi observed that his institution would not breach European Union rules if it bought short-term sovereign bonds; the markets will be watching to see whether the ECB buys any such bonds in the coming days.

US data showed a slight improvement. New orders for manufactured goods rose by 2.8% in July, having dipped by 0.5% in June,reported the US Census Bureau, while the consumer confidence compiled by the University of Michigan rose to a final figure of 74.3 for August, up from 73.6 in July.  But the consumer confidence index compiled by the trade association Conference Board fell to 60.6 in August from 65.4 in July.

Chinese data also pointed the wrong way.  The government-compiled purchasing managers’ index for manufacturing dipped to 49.2 in August,

In the eurozone the purchasing managers’ index for manufacturing, compiled by Markit Economics, stood at 45.1 in August.  This suggested that manufacturing activity contracted again last month, even if the actual figure was a slight improvement from the three-year low of 44.0 seen in July.  Furthermore, the ratings agency Moody’s has changed the outlook for the European Union’s Aaa credit rating to “negative”; this means that the Union faces the possibility of being downgraded if its leading economies were downgraded.

Chinese data also pointed the wrong way. The government-compiled purchasing managers’ index for manufacturing dipped to 49.2 in August, its first indication of contraction since November of last year; the July figure was 50.1. The rival manufacturing PMI, compiled by the bank HSBC, also fell – to 47.6 in August from 49.3 in July; this index gives greater importance to small, export-oriented businesses than does the official figure.

Japanese data was also negative, with industrial production falling by 1.2% (month-on-month), according to provisional figures for July, when a 1.7% rise had been expected.  In addition, forecasts (which are not always accurate) suggest that the figure will rise by just 0.1% in August to be followed by a 3.3% drop in September.

Market details

On the London Metal Exchange, copper for delivery in three months was holding at around $7,667 per tonne earlier this week, up from $7,619 a week earlier.  Holdings of copper in warehouses approved by the exchange eased to 218,800 tonnes earlier this week from 234,200 tonnes a week earlier.  There were also reports of a strike at the Chilean port of Antofagasta, though shippers generally divert cargoes, if they need to.

Three month aluminium was trading at around $1,947 per tonne earlier this week, up from $1,912 a week earlier.  LME stocks stood at 4,878,475 tonnes against 4,893,375 tonnes a week earlier.

Three month aluminium alloy was quoted at around $1,785 per tonne earlier this week, barely changed from $1,780 a week earlier; LME stocks amounted to 83,660 tonnes, having fallen from 88,440 tonnes a week earlier.

Three month nickel was trading at around $16,229 per tonne, down from $16,391 a week earlier.  LME stocks rose to 119,724 tonnes, from 115,236 tonnes a week earlier.

Three month zinc was quoted at around $1,881 per tonne earlier this week, up from $1,865 a week earlier.  LME stocks were 949,550 tonnes earlier this week, against 961,425 tonnes a week earlier.

Three month lead was trading at around $2,004 per tonne earlier this week, up from $1,963 a week earlier.  LME holdings were 305,725 tonnes, down from 314,200 tonnes a week earlier.

Three month tin was eased to around $19,699 per tonne earlier this week, from $20,800 a week earlier.  The decline followed the resumption of spot sales by the Indonesian producer PT Timah.  LME stocks rose to 11,685 tonnes earlier this week from 11,560 tonnes a week earlier.

Steel billet was trading with the three month position at around $385 per tonne earlier this week, little changed from $380 a week earlier.  LME stocks eased to 50,115 tonnes, from 53,755 tonnes a week earlier.

Precious metals made the most of the hoped for liquidity injections.  Spot gold bullion rose to around $1,693.80 per ounce earlier this week, from $1,664.00 a week earlier; spot silver rose to $32.30 per ounce from $30.86, while spot platinum rose to $1,550 per ounce from $1,528.

Chartists, who plot the prices of various commodities (and securities) on graphs, seek to observe patterns which will help them predict how the various markets are going to behave.  One may have more or less faith in the value of this type of analysis, but it is undeniable that significant numbers of traders follow what the numerous chartists are saying, and frequently act on their opinions.

The following are more or less representative of what the charts are forecasting for the main metals:

  • Copper: support is likely around $7,450 per tonne and $7,200, while resistance is likely above $7,720 and $8,000.
  • Aluminium: support is likely around $1,880 and $1,825, while resistance was likely above 2,000.
  • Aluminium alloy: support is likely around $1,675, and resistance above $2,330.
  • Nickel: support is likely around $15,800, while resistance is likely above $16,500 .
  • Zinc: support is likely around $1,800, while resistance is likely around $1,890.
  • Lead: support is likely around $1,820, while resistance is likely above $2,100.
  • Tin: support is likely around $19,400, while resistance is probable above $20,450.
  • Steel billet: support is likely around $370 per tonne, while resistance is likely above $505.
  • Gold: support is likely around $1,670, while resistance is likely around $1,700.
  • Silver: support is likely around $30.75, while resistance is likely above $32.25.
  • Platinum: support is likely around $1,510, while resistance is likely above $1,560.

 

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