Precious metal complex extended its rally with both gold and silver prices trading firm with 3 percent gains each during the last week on rising recession fears and trade worries.
Among the base metals complex, only lead registered 3 percent upside on supply outage in Australia’s smelter, while Nickel prices were hit the most due to higher production and demand worries.
Energy complex closed the week lower with Nymex crude ending flat on uncertain demand outlook while Nymex natural gas prices traded near lows.
Lead prices surged 5 percent from the lows during the last week as one of world’s largest smelter Port Pirie that produces almost 1,60,000 tonnes of output faced shutdown on May 29.
This comes at a time when the LME inventory level is near-decade low at 66,550 tonne and Shanghai stocks at just 27,687 tonne. This tightness created the cash to future spread to reverse towards backwardation of USD 39 from the contango of $14, last week.
Production from China is also expected to decline in the coming months due to maintenance in May, the output from China will slow down by 12 percent in June in anticipation of delayed maintenance and production cuts at smelters.
Emerging supply tightness and the expectation of lower production from China augurs well for lead prices. With the weak macro-economic condition, if US Fed hints at more accommodative, this may further add to the bullishness.
We expect LME lead prices to trade higher towards USD 1970-2050 per tonne in the three months timeframe. Currently, LME Lead prices are trading at $1,850 per tonne.
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