Base metal business was slow on Wednesdays pre-market, with prices sagging in dull conditions ahead of April option declarations later this morning.
It has been pretty quiet here, and we do not expect anything too exciting in the options at the moment, one trader said. Copper traded quietly in a $12 range, easing back to briefly touch $2,349 before holding at $2,350 a tonne, down $10 from Tuesdays kerb.
Traders said there is a strong band of support around current levels that will take some eroding, although the market does have a downside bias. On Tuesday there was yet another failure to challenge the overhead supply between $2,380 and $2,390, while spread backwardations continue to soften.
In early Wednesday trade, the cash/threes backwardation was around $40/43, compared with $60 24 hours earlier.
Option declarations are expected to focus on the $2,400 strike, with the April price currently hovering just above this level.
Aluminium option activity is seen centring on the $1,600 strike, with prices in the underlying market having fallen back this morning. Three months dipped to $1,627, down $3.50 from Tuesday, although the decline lacked substance and is not yet conclusive.
Elsewhere in a lacklustre complex, zinc prices were consolidating after yesterdays impressive run-up to new 4-1/2 year highs of $1,310.
Precious metals prices were mixed on Wednesday morning after a late New York rally in gold failed to follow through into Far East trading, dealers said.
The market tone was mildly bearish especially in silver which had shown little ability to bounce so far after slipping from its $5.07/$5.09 per ounce Tuesday opening to under $5.00.
London and Europe is bearish for gold and silver but New York seems to have a much more bullish view, one dealer said.
Gold was fixed at $350.70 per ounce up from $350.00 on Tuesday afternoon and a close of $350.20/$350.70.
Dealings were fairly light although gold had received some support from the sharp falls in the US equities markets this week.
The interest from people coming out of equities has been fairly minor. It is not yet clear whether or not this is the beginning of a collapse (in equities) or a correction, one dealer said.
The market was wary of the strength of the US economy and steadiness of the dollar, dealers said.
Last weeks 25-basis point rise in the US Fed Funds rate was well anticipated and caused no more than a 50-cent ripple in gold prices.
However, the possibility of a rise in the discount rate meant the market remained cautious.
There is a chance we will see a break towards $348.00, one dealer said, although others emphasised that the price had little incentive to move much from the $350.00 level.
The white metals were suffering more than gold from the higher US interest rates and possibility of further economy-dampening moves, dealers said.
Silver was also easier from the Tuesday close and had barely moved since its $4.96/$4.98 opening level.
After it went under $5.07, it never showed a sign of moving up again, one dealer said, adding that further weakness in silver was likely.
A search for sell stops down around $4.92 could push silver down to around $4.85, he said.
Platinum and palladium were mixed with platinum at $368.75/$369.75, down a fraction from the Tuesday close.
Palladium was at $148.00/$149.00, up $1.25 from the close.
