Global economies recovery is strengthening and gaining momentum, therefore, pressuring investors to target risky investments and high yielding assets, reducing the precious metal appeal as a safe investment. Euro-Zone and the U.K. manufacturing reports yesterday showed that the sector in the region continue on supporting growth and recovery, while today's industrial data would provide further proof to investors that recovery is still intact, even at a faster pace than in the US, which accordingly, will boost demand for risk, thus, causing a drop in commodity prices and low yielding assets.
Crude oil's rally accelerated after breaking above the resistance level at 80. The front-month WTI contract rallied 3% yesterday to a 3-month high and is trading above $82 today. Better-than-expected PMIs in the US and Europe, weakness in USD and news of a tropical depression forming in the Atlantic were forces driving price higher
The metals put in a strong performance on Monday with average gains of 3.6%, with lead leading the gains with a 6.9 percent move, followed by a 4.5 percent move in zinc and 3.7 percent move in nickel. Copper was up 2.5 percent. The metals were up on the back of good US data and on start of month fund buying. The weaker dollar also helped fuel the rally. Our view is that we have seen some short-covering rallies in recent weeks, but these are now looking a bit overstretched and with technical indicators also looking to roll-over, we would expect some consolidation which is likely to be done at lower levels
