The Weekly Dig
Haywood Mining Team
Base Metals Fall as Chinese Manufacturing Data
Disappoints/Gold Holds Steady
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Base metal prices have risen steadily
since the start of the year, which appears at odds with general consensus that
global economic growth will be lower in 2016. In particular, copper, nickel,
lead and zinc were each up 6.5%, 7% and 1% and 18% respectively up until the
end of last week; with the significant rise in the price of zinc coming on the
back of supply deficit concerns, which coincided with LME zinc inventories
falling below the 400,000 tonne level this week for the first time since late
2005/early 2006. It appears, however, that manufacturing data released from
China has put a damper on this enthusiasm. While official Chinese data
continues to reflect an expanding manufacturing sector, with PMI readings above
50 (50.1 in April), data released by Ciaxin suggests continued contraction.
April’s PMI reading from Ciaxin came in at 49.4, and has remained under the 50
level since February 2015. In response, copper, nickel, lead and zinc each fell
5%, 4.2%, 3% and 2.6% respectively, while the S&P TSX Global Base Metals
Index fell 7.4% during the week. It appears that the continued uncertainty and
reliability of economic data from China will likely affects commodity prices,
and base/industrial metals in particular, for the foreseeable future.
Meanwhile, the resilience of the price of gold appears to be strong, with the
yellow metal falling as low as $1,269 per ounce during intra-day trading on
Thursday before recovering to finish at $1,291 per ounce, down only slightly
compared to last week’s close. WTI crude finished lower this week, closing at
$44 per barrel, while the UxC Weekly Spot Price of uranium continued its run
below the $28 per pound level, finishing slightly lower at $27.59 per pound.
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