MI Comment:Gold comes to the rescue

Impatient base metal bears were forced to wait another day on Thursday, as the complex got a late infusion of buy-side fund interest as gold powered higher. Aluminium and zinc in particular were sailing close to important support levels, a break of which was likely to set off fresh selling interest, though the session ended with a late rally. The light metal had slipped from an early high at 2455 towards 2430 before we signed off yesterday and in relatively light trading it twice bottomed at 2420 thereafter. The catalyst for the afternoon’s climb to 2485 was traditional inflation-hedging, with gold jumping $17.00/oz as the dollar weakened significantly after a mixed bag of macro data.

The contraction in the C-3m spread was partly down to the loss of a weekend past Cash and partly to short-covering during the sudden rally, with interim contangos all linear. Forward carries in H2 2009 regained $3.00/mth, while elsewhere in 2008/09/11 some months firmed by $1.00.

Another 8,000t net rise in LME stocks on top of a 1,600t rise in Shanghai did little to inspire would-be buyers on Friday morning and in lacklustre conditions aluminium drifted back from 2480 to 2448. Volumes were on the low side, with Select clocking up only 1,750 lots so far, as traders sat on their hands in advance of this afternoon’s monthly US non-farm payroll data. As it stood, the market was at the lower end of its 15-month price band, with a clear break below 2400 turning trends down, so wrote Cliff Green Consultancy in their daily technical report. Last at 2455.