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Daily Base Metals Report

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The US stocks staged a moderate recovery today after a day of a sharp sell-off that was sparked by fears over a second wave of coronavirus infections building in the US. In response, Jerome Powell reiterated his pledge to focus on return to strong US labour market. The yield on a 10-year Treasuries rose to 0.6903%, after slipping by as much as 25% this week, and the dollar fell. The UK economy shrank by 20.4% in April, the record monthly contraction, as sectors were shattered by coronavirus lockdown.

Sentiment on the LME was positive; aluminium and zinc were the only ones closing lower on the day. Copper prices were firmer; however, gains were moderate, closing above support of $5,700/t at $5,784.5/t. Lead gained the most ground, closing at $1,757.5/t. Cash to 3m spread softened to -$16.90/t. Nickel prices were well bid today but, failed above $12,800/t level and closed at $12,665/t. Aluminium and zinc closed on the back foot, at $1,585/t and $1,977/t respectively.

Fears of second-wave injections derailing economic recovery combined with renewed worries about supply kept oil futures volatile today. WTI and Brent trade $36.20/bl and $38.83/bl at the time of writing. Precious metals were mixed, as silver dropped to $17.53/oz and gold was slightly stronger on the back of continued uncertainty. At the time of writing, gold trades at $1,734.79/oz.


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COVID cases are rising across the globe as the delta variant spreads, this is causing some nervousness in financial markets, especially with the higher inflation rhetoric. Commodity prices have fallen since the Fed changed their tune inflation, the dollar has stabilised which has also been a headwind to prices. The summer months are traditionally quieter for metals demand which could prompt metals to consolidate. If the delta variant continues to spread, we may see higher levels of stimulus for longer. As things stand stimulus levels are set to be tapered and this could be brought forward if inflation remains high. We expect markets to remain volatile but on lower volume through the summer months.