The metals complex remained buoyant yesterday, with precious metals taking centre stage. Further weakness in the USD index has been fuelling the upward momentum, which saw spot gold trading to new record levels yesterday, surpassing the previous high of US$1,921/oz made in 2011. Meanwhile in early morning trading today, the strength in gold has continued, with the market once again trading to fresh highs. All attention in the coming days will be on the FOMC meeting, with the US Fed likely to signal that it is prepared to do more, to keep the recovery on track. While macro developments continue to dictate price action for the metals complex, fundamental developments, even those on the bearish side, have been largely ignored. For copper, better industrial profits from China, coupled with declining inventories have outweighed the news that Antofagasta’s Zaldivar mine has avoided strike action.

The LME lead tom-next spread surged to a backwardation of US$11 yesterday, the highest since June 2019. Although on-warrant inventories have surged from 63kt a week ago to 118kt as of yesterday. LME lead pays no attention to ballooning inventories, instead, it appears to be following the strong momentum seen in the SHFE market. Finally, in aluminium, major producer Rusal, reported a decline of 1.4% QoQ in its aluminium production, leaving it at 927kt in 2Q20, while cumulative output for the first six months of the year remained unchanged to total 1.87mt. 


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