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LME METALS round-up: 14 September

The markets are feeling flush.  The European Central Bank has finally promised to buy as many of the distressed eurozone countries’ sovereign bonds (in the secondary market) as it takes to keep these countries’ interest rates under control. 

This was the kind of “unlimited” commitment that the markets have been looking for since the beginning of the euro crisis.  The bank’s new stance should ensure that there is plenty of liquidity to keep commodity prices afloat.

The bank added that the support would be coupled with strict requirements for fiscal and structural reforms in the countries being aided.  These are essential to prevent the money printing from spiralling out of control, leading to the permanent subsidies to the eurozone’s southern fringe, and eventually rampant inflation – a scary possibility that the eurozone’s northern conservatives, especially in Germany, are already busy decrying.  It should be alright, but it is not yet entirely certain that the bank will succeed in imposing its requirements.

There was also the possibility of more liquidity from the Federal Reserve, the US central bank.  The latest figures for non-farm payrolls showed that the US economy had created only 96,000 new jobs in August, against some 130,000 expected.  The unemployment rate eased to 8.1% of the workforce in August, from 8.3% in July, but that just reflected fewer people looking for jobs.  And since a presidential election is looming in the US – it is due on 6th November – the markets’ assumption was that there would be a boost.

In addition, there was China.  Following the reports last week that Chinese manufacturing was slowing down, the country’s National Development and Reform Commission has approved around 60 new infrastructure projects to be implemented over the next three to eight years.  These range from roads and urban rail systems, through airports and power stations, to sewage systems, and would be worth an estimated one trillion yuan (about £99 billion), equivalent to around 2% of the country’s annual output.  Rather than boost the amount of money looking for a home in the commodity markets, this would increase demand for industrial raw materials from the world’s second largest economy.

Market details

On the London Metal Exchange, copper for delivery in three months was trading at around $8,075 per tonne earlier this week, up from $7,667 a week earlier.  Stocks of copper held in warehouses approved by the exchange edged down to 214,600 tonnes earlier this week from 218,800 tonnes a week earlier.

Three month aluminium was being quoted at around $2,054 per tonne earlier this week, up from $1,947 a week earlier.  LME stocks amounted to 4,862,825 tonnes down from 4,878,475 tonnes a week earlier.

Three month aluminium alloy stood at around $1,905 per tonne earlier this week, well up from $1,785 a week earlier; LME stocks declined to 81,920 tonnes from 83,660 tonnes a week earlier.

Three month nickel was trading at around $16,739 per tonne, up from $16,229 a week earlier.  LME stocks rose to 120,810 tonnes, from 119,724 tonnes a week earlier.

Three month zinc was holding at around $1,997 per tonne earlier this week, up from $1,881 a week earlier.  LME stocks stood at 933,100 tonnes earlier this week, down from 949,550 tonnes a week earlier.

Three month lead was quoted at around $2,115 per tonne earlier this week, up only slightly from $2,004 a week earlier.  LME stocks stood at 300,650 tonnes, down from 305,725 tonnes a week earlier.

Three month tin was trading at around $20,700 per tonne earlier this week, up from $19,699 a week earlier.  LME stocks barely moved, standing at 11,665 tonnes earlier this week against 11,685 tonnes a week earlier.

Steel billet was trading with the three month position at around $360 per tonne earlier this week, down from $385 a week earlier.  LME stocks remained unchanged on the week, at 50,115 tonnes.

Precious metals were again boosted by the hoped for liquidity injections.  Spot gold bullion traded up to around $1,731.60 per ounce earlier this week, from $1,693.80 a week earlier; spot silver rose to $33.65 per ounce from $32.30, while spot platinum moved ahead to $1,606 per ounce from $1,550.

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 $7,880 per tonne and $7,450, while resistance is likely above $8,130.

Aluminium: support is likely around $2,000, while resistance was likely above 2,100.

Aluminium alloy: support is likely around $1,675, and resistance above $2,330.

Nickel: support is likely around $15,900, while resistance is likely above $17,400.

Zinc: support is likely around $1,920, while resistance is likely around $2,000.

Lead: support is likely around $2,100, while resistance is likely above $2,175.

Tin: support is likely around $20,000, while resistance is probable above $21,500.

Steel billet: support is likely around $350 per tonne, while resistance is likely above $400.

Gold: support is likely around $1,700, while resistance is likely around $1,750.

Silver: support is likely around $32.50, while resistance is likely above $34.30.

Platinum: support is likely around $1,570, while resistance is likely above $1,615.

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