Base metal prices news: surviving the stress of the US Federal Reserve’s key rate hike
On Wednesday, July 27, copper prices showed positive dynamics in London on hopes of strengthening demand for metals in China. The three-month LME copper contract rose 1.1% to $7,620 a ton by the close of trading, after falling to $6,955 a ton on July 15.
The overall market sentiment was bullish, boosted by positive US corporate reports that lifted the stock market.
Base metal prices news
According to Marex’s estimates, metal prices were supported by active short covering by speculators, who accumulated short positions and are now forced to make buybacks.
Meanwhile, copper inventories in ShFE warehouses and Chinese customs warehouses are at historic lows. Yangshan premium to the price of copper rose to $87 per ton, the highest value since December, indicating an increase in demand for imported metal.
Meanwhile, analysts at Citibank forecast that China’s economic recovery will stall and copper prices will fall to $6,600 a ton within 6-9 months. “We recommend selling copper and nickel in the coming week as a recession in Europe, a global economic slowdown and a serious supply increase move the commodities market into surplus,” the bank’s experts said.
Base metals price trends
According to economists polled by Reuters, a lot of key economies face the risk of a recession amid high inflation.
Current price of base metals: the cost of aluminum with delivery in 3 months at the LME did not change, amounting to $2,421.5 per ton. Zinc also remained unchanged at $3039/t. Nickel gained 0.8% to $21,750 per ton. Lead dropped by 0.2% to $2,020 per ton. Tin dropped by 1% to $24235/t.
In morning trading on Thursday, July 28, prices of most metals grew in London amid a weaker dollar, and prospects of less aggressive raising the key rate in the U.S., as well as optimism about China’s economic stimulus measures.
As, a three-month LME copper contract rose 1.8% to $777 per ton.
The U.S. Federal Reserve raised its key rate by 0.75% to curb inflation, which is in line with market expectations. Fed chief Jerome Powell’s comments after the rate hike are seen as “calmer,” prompting expectations of fewer possible base rate hikes in the remainder of the year.
Aluminum on the LME rose 1.6% to $2,460.5 per ton. Zinc with three-month delivery rose 2.4% to $3,126.5 per ton. Lead futures rose by 1% to $2,033 per ton. The price of nickel was down 0.4%, to $21730/t.
“More stimulus for [China’s] economy will help support confidence in the market in the short term,” said CRU Group copper market analyst He Tainyu. – However, pressure on prices will persist if China’s export market and real estate market remain in a weak position for a longer time.”
What is the base metals price outlook? The September copper contract rose 3% on the ShFE to 6,280 yuan ($8,937.65) per tonne.
Aluminum rose 4.1% to 18775 yuan per ton in Shanghai. The price of lead rose 0.7% to 15305 yuan per ton. Tin rose by 1.3%, to 195.23 thousand yuan per ton. Quotes on the price of nickel rose by 0.6%, to 169.06 thousand yuan per ton. These are base metals price trends we have today.
Brent crude oil futures its lowest since 2021 amid banking crisis
The cost of May futures on Brent crude oil fell to $72.74 per barrel, losing 0.31%, according to data from the ICE exchange. Brent was trading at about $70 a barrel at its low for the day. That’s a record low for at least 15 months, that is, since December 2021.
WTI prices are also falling, with futures prices down to $66.43 a barrel (-0.46% from last week’s close), according to the exchange. WTI was trading at $64.12 a barrel at its low for the day. This is also the lowest value since at least December 2021.
The market is thus responding to the banking crisis: since the beginning of March, three banks (Silvergate Bank, Silicon Valley Bank, Signature Bank) have closed their doors in the US, and the day before, on March 19, Swiss UBS took over its rival, Credit Suisse, buying the bank for $3.2bn amid fears of its collapse. Investors fear a recession, which may cause a crisis in the banking sector, as a recession, in turn, would lead to lower demand for fuel, the agency said.
“Oil prices are moving mainly because of fears [of further oil price dynamics]. Supply and demand fundamentals are almost unchanged, only the banking problems have an impact,” said Price Futures Group analyst Phil Flynn.
Oil prices lifted from daily lows helped the S&P 500 and Dow Jones indices, which rose Monday, writes Reuters. Traders raised their expectations that the U.S. Federal Reserve would refuse to raise rates this Wednesday to protect financial stability amid banking problems, the agency noted.
“Volatility is likely to persist this week, with broader financial market concerns likely to remain at the forefront,” ING Bank analysts said in a note. They add that the impending Fed decision adds to uncertainty in markets.
Earlier we reported that the price of Brent dropped below $75 per barrel for the first time in more than a year.
Gold prices will reach $2,075 “in the coming weeks”
Gold prices may continue to rise, analysts polled by the CNBC TV channel said. In their opinion, the difficulties of banks and a possible turning point in the policy of the Federal Reserve indicate the possibility of a new rise in gold prices.
“I think it’s likely that we’ll see a strong move in gold in the coming months. The stars seem to be aligned for gold, and it could soon break new highs,” said Craig Erlam, senior market analyst at brokerage Oanda.
The expert explained that interest rates are now at or close to their peak, and the market, amid recent developments in the banking sector, is laying on an earlier than previously expected start of rate cuts. They also added that this situation would boost demand for gold even if the U.S. dollar weakens.
This month, Fitch Solutions rating agency predicted that gold prices would reach $2,075 an ounce “in the coming weeks” amid global financial instability, writes RBC. The company also added that gold prices will remain at a higher than pre-pandemic levels in the coming years. Craig Erlam confirmed this forecast.
Other Wall Street experts are also predicting a long-term rise in gold prices. For instance, Tina Teng, analyst for British financial company CMC Markets, thinks that the U.S. Federal Reserve’s sooner departure from its policy of raising interest rates might provoke another rally in gold prices due to the weakening U.S. dollar and falling bond yields.
Earlier we reported that oil prices accelerated their decline, continuing a trend from the beginning of the week.
Analysts at U.S. bank Goldman Sachs revised its forecast on oil prices
Analysts at U.S. bank Goldman Sachs, one of the most optimistic forecasts about the cost of oil, changed its earlier forecast about the growth of oil prices to $100 in the next 12 months, Bloomberg said.
Now analysts predict that Brent crude oil will reach $94 per barrel in the next 12 months and $97 per barrel in the second half of 2024, the publication said.
The bank said oil prices have fallen despite rising demand in China, given pressure on the banking sector, recession fears and investor withdrawal.
“Historically, after such traumatic events, price adjustments and recoveries are only gradual,” the bank notes.
This week, the situation surrounding Swiss bank Credit Suisse triggered panic in the markets as oil plummeted to a 15-month low and Brent crude fell 12% to below $73 a barrel.
After the price decline, the bank expects OPEC producers to increase production only in the third quarter of 2024, contrary to Goldman’s forecast that it will happen in the second half of 2023. Analysts at the bank believe a barrel of Brent blend will reach $94 in the next 12 months and trade at $97 in the second half of 2024.
Bloomberg reported that the largest oil exporter, Saudi Arabia, announced higher April oil prices for markets in Asia and Europe.
Earlier, we reported that Iraq and OPEC advocated for guarantees of no fluctuations in oil prices.
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