Metal Prices to Undergo Downward Corrections on US Debt Deal -Shanghai Metals Market

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Metal Prices to Undergo Downward Corrections on US Debt Deal

SMM Insight 11:25:48AM Aug 02, 2011 Source:SMM

SHANGHAI, Aug. 2 (SMM) -- The US House of Representatives have passed a deal to raise the debt ceiling, and the debt limit deal has a greater probability to be passed by the Senate, so the US government’s debt ceiling is expected to be raised. If all goes well, the US dollar index will rebound in the short term, which may cause SHFE base metal prices to undergo downward corrections.

The US House of Representative passed the debt limit proposal by a vote of 269-161 on August 1st, and have sent it to the Senate. Senate majority leader Harry Reid said the Senate will vote on the deal at 00:00 Beijing time on August 2nd. Previously, some analysts predicted that there was high possibility that the deal would be passed by the Senate. The news caused the US dollar index to rebound strongly, while international spot gold prices posted an intraday drop of more than 1% on August 1st, with prices even hitting a low of USD 1,606.75/oz, down from a record high of USD 1,632.30/oz seen on July 29th. The most active US COMEX gold futures fell by over 1%, with the lowest prices even hitting USD 1,607/oz, but later pared losses to less than 1%.

LME base metal prices largely closed with losses overnight, weighed down by significant rebound of the US dollar and disappointing manufacturing data from the US. LME copper futures contract for delivery in three months closed USD 155/mt lower, or down by 1.58% overnight, the largest single day decline in two months, with prices finally closing at USD 9,685/mt, the lowest closing price since July 11th. LME aluminum futures closed at USD 2,587/mt, down by USD 40.5/mt from a day earlier. LME lead futures closed USD 52.25/mt lower at USD 2,570/mt.LME zinc futures ended USD 32.25/mt lower at USD 2,472.75/mt. LME nickel futures finished at USD 24,635/mt, down by USD 258/mt from a day earlier. LME tin futures closed at USD 28,199/mt, up by USD 99/mt from a day earlier.

Investors’ concern over impending US debt default and a series of disastrous results has been eased following the consensus reached by the two parties. Therefore, a new financial turmoil is avoided temporarily, and international investors’ confidence did not be dampened significantly. However, the AAA credit rating of the US may be cut down, despite of the consensus on raising debt ceiling reached by the two parties, which may trigger turbulence in the US financial market. The US debt issue and the EU debt crisis are still major factors affecting international base metal market movement. From a long-term perspective, raising the US debt limit means that the US will continue to overdraft its future credit, so the US dollar faces higher risks in the future. In this context, the US dollar may hard to reverse its downward track, which will add new uncertainties on financial and commodity markets in the future.
 

Key Words:  macro policy 

Price

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1# Zinc
Oct.18
18810.0
-10.0
(-0.05%)
0# Zinc
Oct.18
18880.0
-10.0
(-0.05%)
T/C for domestic zinc concentrate
Oct.01
6325.0
0.0
(0.00%)
T/C for imported zinc concentrate
Oct.01
280.0
0.0
(0.00%)
Zinc Alloy (Zamak3/ZX01)
Oct.18
19780.0
-10.0
(-0.05%)

Metal Prices to Undergo Downward Corrections on US Debt Deal

SMM Insight 11:25:48AM Aug 02, 2011 Source:SMM

SHANGHAI, Aug. 2 (SMM) -- The US House of Representatives have passed a deal to raise the debt ceiling, and the debt limit deal has a greater probability to be passed by the Senate, so the US government’s debt ceiling is expected to be raised. If all goes well, the US dollar index will rebound in the short term, which may cause SHFE base metal prices to undergo downward corrections.

The US House of Representative passed the debt limit proposal by a vote of 269-161 on August 1st, and have sent it to the Senate. Senate majority leader Harry Reid said the Senate will vote on the deal at 00:00 Beijing time on August 2nd. Previously, some analysts predicted that there was high possibility that the deal would be passed by the Senate. The news caused the US dollar index to rebound strongly, while international spot gold prices posted an intraday drop of more than 1% on August 1st, with prices even hitting a low of USD 1,606.75/oz, down from a record high of USD 1,632.30/oz seen on July 29th. The most active US COMEX gold futures fell by over 1%, with the lowest prices even hitting USD 1,607/oz, but later pared losses to less than 1%.

LME base metal prices largely closed with losses overnight, weighed down by significant rebound of the US dollar and disappointing manufacturing data from the US. LME copper futures contract for delivery in three months closed USD 155/mt lower, or down by 1.58% overnight, the largest single day decline in two months, with prices finally closing at USD 9,685/mt, the lowest closing price since July 11th. LME aluminum futures closed at USD 2,587/mt, down by USD 40.5/mt from a day earlier. LME lead futures closed USD 52.25/mt lower at USD 2,570/mt.LME zinc futures ended USD 32.25/mt lower at USD 2,472.75/mt. LME nickel futures finished at USD 24,635/mt, down by USD 258/mt from a day earlier. LME tin futures closed at USD 28,199/mt, up by USD 99/mt from a day earlier.

Investors’ concern over impending US debt default and a series of disastrous results has been eased following the consensus reached by the two parties. Therefore, a new financial turmoil is avoided temporarily, and international investors’ confidence did not be dampened significantly. However, the AAA credit rating of the US may be cut down, despite of the consensus on raising debt ceiling reached by the two parties, which may trigger turbulence in the US financial market. The US debt issue and the EU debt crisis are still major factors affecting international base metal market movement. From a long-term perspective, raising the US debt limit means that the US will continue to overdraft its future credit, so the US dollar faces higher risks in the future. In this context, the US dollar may hard to reverse its downward track, which will add new uncertainties on financial and commodity markets in the future.
 

Key Words:  macro policy