Metals

Increased risk appetite saw a big sell-off in the precious metals yesterday with gold falling by 5.7% while silver declined by almost 15%. A rally in US Treasury yields, also saw real yields rebound, which weighed on gold. Optimism over possible tax relief, further economic stimulus in the US, positive economic data elsewhere and news of a Russian Covid-19 vaccine appears to have prompted investors to pull money from safe havens and put these into riskier assets. ETF holdings of gold dropped for the third consecutive day falling by 155koz yesterday, taking the  total decline over the last three days to 336koz

Base metals were largely flat, with Chinese credit growth unexpectedly slowing in July. Investors are perhaps in a wait-and-see mode, awaiting further economic stimulus and to see how US/China trade talks go before putting on further bullish bets.

As for lead, the latest data from Antaike shows that China’s total refined lead output in the first seven months of the year decreased by 3% YoY, mainly due to a sharp contraction in secondary production earlier this year (primary +3.4% YoY; secondary -10.3% YoY). However, the production trend in July between primary and secondary saw a major reversal with growth in secondary lead production overtaking primary (primary -6.4% MoM; secondary +9.8% MoM). The current expectations are that secondary production will continue to grow, but are unlikely to maintain the strong growth seen in July since the supply of scrap lead-acid batteries will likely be a bottleneck. On the primary side, smelters are supposed to be incentivised to operate as close to capacity as possible, which could see primary production resume growth from August.  

For zinc, data from Metal Bulletin shows that the physical premiums in Singapore softened to around US$90/t, compared to US$95/t a week ago, reflecting relatively softer demand in the physical market ex-China.  

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