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Daily Base Metals Report

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US stocks started the week on the back foot amid the surge of coronavirus cases. Trump has urged the officials to recalculate the election results over the two Senate seats in Georgia, which could help determine whether the Democrats will have full control over the Congress; this shift would help set the scene for a much clearer path for Biden’s agenda. Meanwhile, the US 10-year breakeven inflation rate has broken above 2.00%, the highest level of expectations since 2018. The dollar edged down to 89.892 the 10yr US Treasury yield softened out to 0.9082%. Elsewhere, Scotland will implement another national lockdown, while England is under pressure to follow suit as the spread of infections accelerates. Germany’s manufacturing IHS PMI grew at the fastest pace in 30 months in December, highlighting the outlook for improving industrial sector.

All LME metals advanced today as a weaker dollar and improving demand outlook set the scene for higher prices. Aluminium prices were firmer, however lack of appetite above $2,040/t, triggered a close at $2,031.50/t. Copper prices tested the resistance of $7,950/t and closed at $7,860.50/t. Nickel saw the biggest growth, trading up to $17,520/t, the highest level in nine months, and closed just below the day’s high at $17,404/t; cash to 3-month spread widened out to -$60.00/t. Likewise, lead prices opened on the front foot today, breaking through the key resistance level of $2,040/t to close at $2,051.50/t. Iron ore prices were higher on the day on the back of shrinking port stockpiles in China, closing at CNY999/mt.

Oil futures fell today ahead of the OPEC+ meeting on supply cuts. At the time of writing, WTI trades at $47.64/bl and Brent is seen at $51.13/bl. Gold surged above $1,900/oz, growing by above 2% today, on the back of declining US yields and a weakening dollar; silver was up by 3.25%. At the time of writing, gold and silver trade at $1,940.30/oz and $27.16/oz respectively.

Disclaimer

This is a marketing communication. The information in this report is provided solely for informational purposes and should not be regarded as a recommendation to buy, sell or otherwise deal in any particular investment. Please be aware that, where any views have been expressed in this report, the author of this report may have had many, varied views over the past 12 months, including contrary views.

A large number of views are being generated at all times and these may change quickly. Any valuations or underlying assumptions made are solely based upon the author’s market knowledge and experience.

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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.