LME zinc cancelled warrants increased by another 49kt yesterday to surge to around 107kt, their highest level since October 2017, ING’s commodity analysts Ewa Manthey and Warren Patterson note.
“The majority of the cancellations came from Singapore warehouses, hinting at strong demand for physical metals in the Asian market. Cancelled warrants now account for around 41% of the inventory in LME warehouses. Higher demand in the physical market could also be seen in the forward curve, where spot prices trade at a premium of US$5.2/t compared to the 3-month contract. This is still not as tight as in October, when the premium hit a high of US$58/t.”
“Gold prices continue to trade flat after the rout on Monday as the market assesses the positives and negatives. On the positive side, the US Fed is likely to continue with rate cuts at its next meeting, with the CME’s Fed watch tool currently hinting at a 68% probability of 25bp cuts. This was at around 56% a week ago. Even after the Israel-Hezbollah deal, a fair amount of uncertainty remains in the Middle East and Europe, which could keep safe-haven buying supportive for gold in the medium term.”
“On the other hand, inflation numbers were on the higher side yesterday with the US Personal Consumption Expenditure (PCE) index increasing to 2.8% YoY (+0.3% MoM) from 2.7% a month ago. A sticky inflation number could weaken the case for further rate cuts.”
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