Written Commentary
BASE METALS
Copper: Copper prices are lower, with benchmark three-month copper on the LME down 0.1% at $12,765 as still-elevated oil prices fueled concerns over its impact on global growth and a rise in inflation. However, supporting sentiment for industrial metals was strong economic data out of China. China’s industrial output rose 6.3% year-on-year in January-February and fixed asset investment rose 1.8%. Both readings beat estimates. Retail sales, a gauge of consumption, jumped 2.8%, quickening from the 0.9% pace in December for their biggest gain since October last year. Analysts had expected 2.5% growth. The reading was driven in part by the country’s Lunar New Year holiday, which boosted tourism spending.
However, rising warehouse inventories continue to provide headwinds to prices. Copper inventories at the London Metal Exchange continue to rise alongside inventories at SHFE warehouses. The rise in SHFE warehouses has largely been reflective of subdued demand in the country. Meanwhile, COMEX inventories continue to hover above 545,000 tons. Expectations of sluggish demand have widened the discount for the LME cash copper contract over the three-month forward to above $100 a ton from nearly $20 a ton at the beginning of March.
Zinc: Zinc lost 0.9% to $3,266.
Aluminum: Aluminum retreated 1.5% to $3,389. Expectations of shortages continue to keep prices firm. LME aluminum stocks have fallen to their lowest since July. The war in Iran has affected deliveries from aluminum producers in the region that account for around 9% of global aluminum supply and sparked fears of disrupted imports of raw materials such as alumina to these producers via the Strait of Hormuz.
Easing some of the immediate worries, Norsk Hydro on Thursday its Qatalum aluminum smelter in Qatar was halting the curtailment it began last week and would maintain production at around 60% capacity with reduced gas supplies.
Tin: Tin gained 1% to $47,540.
Lead: Lead fell 0.5% to $1,897.
Nickel: Nickel was flat at $17,270.
PRECIOUS METALS
Gold: Gold prices are lower, with April COMEX contracts down 0.60% to $5,030. The Trump administration could announce this week that multiple countries have agreed to form a coalition to escort ships through the waterway, The Wall Street Journal reported on Sunday, citing US officials. Oil prices have fallen since the report but still remain elevated.
Focus outside of the conflict in the Middle East will center around the Fed’s meeting this week, where it is expected to leave rates on hold while also updating its economic projections. the key question for markets will be what signals the bank sends on the prospects for further easing this year. Fed Chair Powell is expected to highlight two-sided risks to the economy, stemming from the conflict. His statement, however, is not expected to offer a clear signal about the implications on monetary policy. Money markets are pricing just one rate cut this year from the Fed.
Energy markets remain the primary driver of sentiment. The conflict in Iran presents upside risks to inflation, which has prompted fears that world central banks could turn hawkish into the year. This dynamic, alongside a rising dollar, has pressured precious metals prices in recent weeks. Other central banks including the European Central Bank, the Bank of England and the Bank of Japan will also meet this week, with the focus on policymakers’ assessment of the Iran war on inflation, growth and future policies.
Silver: Silver futures are down 0.30% to $81.10.
Platinum: Platinum is up 3.50 % to $2,112.
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