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Daily Base Metals Report

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US stocks rallied on Friday despite consumer sentiment falling to the lowest level since 2011. The S&P 500 reached an all-time high but softened off this level. Consumer sentiment in the US fell 11 points to 70.2, well below estimates. The decline in sentiment could indicate lower consumer spending as the delta variant spreads across the economy. and prices continue to rise. Inflation expectations continue to climb due to supply-chain constraints with long lead times for products. The dollar and US treasury yields declined. 

Trading on the LME was positive, except for Nickel which failed into resistance at $19,750/t and closed at $19,656/t. Copper was well bid this afternoon and closed at $9,570/t after testing appetite below $9,460/t. The cash to 3month spread is still in contango at -$27.50/t. Aluminium continues to push higher, breaking above $2,600/t and closed at this level, the cash to 3month spread has tightened today into an $8.25/t backwardation. Lead and zinc were bid as well today, closing at $2,334/t and $3,033.50/t, respectively. Tin prices continue to rise and closed at $35,324/t, with the cash to month spread narrowing to $435/t.

Energy prices have buckled today with Brent and WTI trading at $70.64/bl and 68.48/bl respectively, Precious metals were well supported today, with gold trading toward $1,780/oz at $1,778.78/oz at the time of writing with silver trading $23.80/oz. 

 

Geordie Wilkes, Head of Research 

 

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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.