Commodities Daily - February 21, 2020

> Gold advances yesterday and reaches $1,630/oz this morning amid elevated safe-haven demand. Investors remain concerned about the spread of the coronavirus outside of China, primarily in Japan and South Korea. Chinese car sales slumped 92% y-o-y in the first two weeks of February, which has compounded the market pessimism, while Facebook has reportedly pulled out of a video gaming developers' forum in the US due to the virus. Today will see preliminary PMI indexes for the US and eurozone for February. Gold investors have likely stepped up purchasing in anticipation of the data, which should reflect the impact of the virus for the first time. Should the data prove resilient, gold could lose momentum. We expect it to stay in the $1,620-1,630/oz range today.> Base metal prices under pressure from inventory builds, coronavirus spread. Despite the PBoC cutting rates on certain lending facilities yesterday, investors have been more focused on the coronavirus spreading and an inventory build at the Shanghai Futures Exchange disclosed today. Yesterday, the International Copper Study Group reported that there was a surplus in the refined copper market in November. The International Aluminum Institute also released aluminum production data for January. As we write, the 3m forward contract for copper is trading at $5,700/tonne, for zinc at $2,100/tonne and for nickel at $12,600/tonne.GOLD ADVANCES YESTERDAY AND REACHES $1,630/OZ THIS MORNING AMID ELEVATED SAFE-HAVEN DEMANDThe gold market rally is primarily being fueled by concerns over the impact of the coronavirus on the global economy and expectations that central banks will announce new measures to support financial markets. Meanwhile, the virus is spreading rapidly in Japan and South Korea. This morning, the Japanese manufacturing PMI for February came in at 47.6, down from 48.8 in January, while the services PMI dropped to 46.7 from 51. The market's disappointment was compounded by a 92% y-o-y drop in Chinese car sales in the first two weeks of February. Meanwhile, Facebook has announced its withdrawal from a video game developers' forum in California on March 16-20, citing the coronavirus.The Fed's rhetoric remains moderate. The minutes from the latest FOMC meeting indicate that the regulator is not ready to raise or reduce rates in the near term. The US Philadelphia Fed manufacturing index published yesterday showed a sharp rise to 36.7 in February (the consensus was 12). Fed Vice Chairman Richard Clarida said US fundamentals are solid and that the lower trade tensions may be supportive for the economy. Today will see preliminary PMI indexes for the US and eurozone for February. Gold investors have likely stepped up purchasing in anticipation of the data, which is set to reflect the impact of the virus for the first time. Should the data prove resilient, gold could lose momentum. We expect it to stay in the $1,620-1,630/oz range SE METAL PRICES UNDER PRESSURE FROM INVENTORY BUILDS, CORONAVIRUS SPREADBase metals prices have been under pressure yesterday and today, with the markets worried about the coronavirus spreading outside of China and also builds in Shanghai Exchange inventories. The PBoC's decision to cut its 1y and 5y lending rates failed to offset the pressure, as the measures had been expected. As we write, the 3m forward contract for copper is trading at $5,700/tonne, for zinc at $2,100/tonne and for nickel at $12,600/tonne.The mood is downbeat this morning. The Shanghai Futures Exchange released inventory statistics for the last week, reporting a rise of 14% in copper stocks, 21% in aluminum and 18% in zinc. Nickel was the only metal the inventories of which were stable (they actually decreased 4%). Yesterday, the International Copper Study Group issued 11m19 figures for the copper market that showed a global deficit of 384k tonnes but a surplus of 33k tonnes was recorded in November. Demand for copper over 11m19 was stagnant, dropping 0.5%, although output of refined copper also declined by 0.5%. In addition, the International Aluminum Institute presented data on aluminum output in January, although these figures do not reflect the effect of the coronavirus outbreak. Output climbed just 0.2% globally and 1.2% in