Base metals vulnerable to short-covering rallies,investor interest not strong in Silver

Buying Nickel on dips is advised although analysts are surporsed on lack of movement in prices which could be due to market complacency with regard to the Indonesian ore export ba

LONDON (Commodity Online): 

Short positions have increased sharply in Copper, nickel and Zinc which makes it vulnerable to short covering rallies should there be upside data surprises, according to a weekly report from Barclays.

"Time spreads across the metals have continued to tighten alongside the build in short positions. The LME copper cash to three-month spread is trading at a $43/tn backwardation with two sizeable copper short positions in the March contract. It will be interesting to see whether these positions are physically delivered against," Barclays noted.

Buying Nickel on dips is advised although analysts are surporsed on lack of movement in prices which could be due to market complacency with regard to the Indonesian ore export ban. "Now that the ban is in place and raw material is no loger leaving Indonesian shores, its effect is slowly beginning to to be felt. Physical market indicators are starting to show a moderate increase in NPI and Chinese port ore stock prices, while in copper the lack of concentrate exports is contributing to the decline in spot treatmennt and refining charges. After hitting a high of $130/ton and 13 pounds/lb, recent bids for clean concentrate have been as low as $80/ton and 8 pounds/lb.

Silver rally

The silver was accompanied by a build up physically backed exchange traded funds, short covering activity and firmer volume traded in Shanghai Gold Exchange. ETP holdings recorded their largest daily inflow in a month in the second week of February and have risen by 125 last week, Barclays report said.

"Although industrial demand has shown signs of improving, investor sentiment has yet to move markedly in silver’s favour. In our view, silver’s catch-up with gold looks likely to be short-lived without retail investment support."

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