Metals Prices Seen Gaining on Good Data

The base metal pack may be poised for an increase on Friday as economists expect positive economic data releases.
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The base metal pack may be poised for an increase on Friday as economists expect positive economic data releases. Retail sales rose a seasonally adjusted 0.4% to $366.4 billion in April, higher than forecasts, and industrial production is expected to rise to 0.6% from 0.1%.

Moreover, industrial capacity utilization is forecasted to improve by 50 basis points to 73.7% from 73.2% a month ago, while business inventories for March are expected to accumulate at a lower rate of 0.4% compared with 0.5%. We reckon that these data releases may be the cause for momentary triggers in base and precious metal prices.

Gold

Despite the fact that $1 trillion has been pledged to rescue the eurozone, we believe that it hasn't instilled confidence among investors which would result in a lot of money flowing into gold. Gold is considered to be a safe haven for investors during turbulent times.

Confidence Crisis Bolsters Gold (Forbes)

We reckon that gold should touch levels of $1,260 to $1,265 an ounce in the near term and sustain above that. Spot gold was trading at record highs $1,248 an ounce in early trade Friday.

Silver

Silver was up 1.4% in early trade on Friday at $19.6575. On May 13,

iShares Silver Trust

(SLV) - Get Report

revealed that its holdings rose more than 76.22 tonnes to 9,191.37 million tonnes.

Silver may trade sideways Friday as stock markets look dicey and economic data from the U.S. are expected to have mixed to positive impact.

Aluminum

The three-month LME aluminum forwards closed at $2,170 a ton, up 2.3%. Aluminum inventories at LME warehouses fell 6,025 tonnes to 4.48 million tonnes on Thursday. According to

Marubeni

, Japan's largest importer of the metal, aluminum stockpiles in Japan dropped 1.2% in April from March, the second month of decline.

Rusal

, the world's largest aluminum maker, swung to a profit during the first quarter of this year joining rivals

Alcoa

(AA) - Get Report

and

Aluminum Corp of China

(ACH) - Get Report

. The company may raise production targets beyond the planned 4.1 million metric tonnes because of the growing Asian demand.

Alcoa was up 6% at one point in trade on Thursday, rising on news of an

Aluminum ETF launch

later during the year.

Another positive to the metal price is that China, the world's largest consumer of the metal, has stopped selling discounted power to high-usage companies thereby affecting makers of aluminum and ferroalloy. This will lead to higher cost of production of aluminum and result in higher prices.

Copper

The LME three-month forward copper prices increased 1.9% to $7,160 per ton, after making an intraday high of $7,182/tonnes on Thursday. Copper inventories on LME shed 1,225 tonnes to close at 485,150 tonnes.

LME copper has slid 4.8% this month on concern that planned austerity steps in Europe may do too little to stem the potential spread of the Greek crisis, possibly slowing the region's economic recovery. Also, China's industrial production data has come below expectations, prompting people to believe that base metal prices might see a downfall. We expect copper, which is hovering around $7,100, to fall to about $6,800.

Nickel

The LME nickel three-months forward is trading in line with other base metals. Prices ticked up by 1% to $22,775 per ton, after making a high of $23,159 levels during Thursday. Inventories suggest outflow of 876 tonnes to total at 142,620 tonnes.

We expect similar trends in nickel like copper with a flat to negative bias.