Gold rises for third consecutive session
Bengaluru — Gold prices rose for a third consecutive session on Friday to their highest since September as the slumping dollar drew investors to buy the metal. Bullion is on track for its fifth weekly gain.
Spot gold edged up 0.3% to $1,326.68/oz by 3.18am GMT. Prices rose their highest since September 15 2017, at $1,327. Gold is up 0.5% for the week so far and the streak of weekly gains is the most since the week ending April 14. US gold futures were up 0.3% at $1,326.90/oz.
The dollar index, which measures the greenback against six rival currencies, fell to its lowest since September 20 2017, at 91.689. The euro jumped against the dollar as the European Central Bank (ECB) signalled it could begin to wind down its €2.5-trillion stimulus programme this year. A stronger euro potentially boosts demand for gold by making dollar-priced bullion cheaper for European investors.
“There is a lot of doubt on how long prices have run from here.… Prices have only risen despite the Fed raising interest rates and main driver has been the US dollar, which we continue to see help gold run higher in the first quarter,” said Brian Lan, MD at dealer GoldSilver Central in Singapore.
“Gold has to breach the recent high of $1,327, above which prices can touch $1,360.”
Spot gold was expected to test a resistance at $1,329/oz, with a good chance of breaking above this level and rising more to the next resistance at $1,341, said Reuters technical analyst Wang Tao.
The greenback was also under pressure after data showed producer prices in the US fell for the first time in nearly one-and-a-half years in December amid declining costs for services. Weak inflation at the producer level could add to the concern that the factors restraining inflation could become more persistent and result in the US Federal Reserve being more cautious about raising interest rates this year.
Higher rates could dent demand for non-interest-paying gold.
Investors will be watching the US consumer price index (CPI) data due later on Friday, which is expected to show inflation increased 0.2% in December after rising 0.4% in November.
Among other precious metals, spot silver rose 0.7% to $17.06/oz. Silver is on track for its first weekly loss in five weeks. It was down about 1% so far this week.
Platinum rose 0.5% to touch its highest since September 12 at $990.20/oz. Platinum was on track for its fifth straight weekly gain. It has risen 1.7% so far this week.
Palladium was up 0.4% at $1,087.95/oz, after dropping to a more than one-week low at $1,075.50 on Thursday.
China Sets New Records for Gobbling Up the World’s Commodities
By Pratish Narayanan
China’s 2017 imports of oil to iron ore and soybeans increase
Demand likely to keep up steam as economic growth persists
China continues to gobble up the world’s commodities, setting new records for consumption of everything from crude oil to soybeans.
In a year of flux marked by industrial capacity cuts, environmental curbs and financial deleveraging, demand for raw materials has continued to grow in the world’s biggest consumer, helping drive a second annual gain in global commodity returns.
The Bloomberg Commodity Index was up 0.3 percent at 7:19 a.m. London time, climbing for a fourth day. The gauge of returns from raw materials rose 0.8 percent last year after advancing 11.4 percent in 2016.
As President Xi Jinping consolidates power behind an economy that may have posted its first full-year acceleration since 2010, there are few signs of the Chinese commodity juggernaut slowing as it rolls into 2018.
“China’s economic expansion has been beating expectations since the second half of last year, boosting demand for all kinds of commodities,” Guo Chaohui, an analyst with Beijing-based China International Capital Corp., said by phone. “We are expecting continued strength in economic growth in 2018 which will keep up the nation’s import appetite.”
The crown of the world’s biggest oil importer now sits firmly atop China after the nation’s shipments surpassed the U.S. on an annual basis for the first time ever. What’s more, it’s also one of the largest buyers of American crude.
Inbound shipments from across the globe — Russia to Saudi Arabia and Venezuela — jumped about 10 percent to average 8.43 million barrels a day in 2017, data from China’s General Administration of Customs showed on Friday.
The unprecedented purchases may be bettered in 2018, if import quotas granted by the government to China’s independent refiners are a signal. The first batch of allocations was 75 percent higher than for 2017.
Mr. Blue Sky
The world’s second-biggest economy is also realizing that the key to winning its war on smog may lie overseas. Record amounts of less-polluting grades of iron ore — typically not available within China — are being pulled in to feed the nation’s mammoth steel industry, with imports rising 5 percent to 1.07 billion metric tons in 2017.
China’s increasing emphasis on cleaner air has spurred a flight to quality in the global iron ore market, boosting the premium users will pay for better material and underpinning a rebound in benchmark prices from the low-$50s in June. Mills’ preference for higher grades will probably persist, the Australian government said this week.
Steel demand in the Asian country — which produces half the world’s supply and buys about two thirds of global seaborne ore shipments — also looks stable as mills are keeping more output at home. Exports slumped 30.5 percent to 75.43 million tons in 2017. That drop is unlikely to reverse easily.
Purchases of less-polluting ore is only one tactic in China’s war against pollution. Another is curbing coal use and encouraging the use of cleaner natural gas instead. Imports of the fuel via both sea and pipeline surged almost 27 percent to 68.57 million tons in 2017.
The country’s appetite for natural gas spawned a supply shortfall this winter, signaling that there’s still space for purchases to grow. Beijing-based China International Capital Corp. and JLC Network Technology see consumption expanding 10 percent this year while Sanford C. Bernstein predicts demand may rise as much as 15 percent.
Still, don’t count coal out yet. Overseas shipments of the dirtier fuel rose 6.1 percent to 270.9 million tons in 2017, as the government’s drive to cut capacity at smaller, less efficient mines and safety inspections limited domestic production.
Food for Farms
And while China is trying to clean up its air, it’s also seeking more food for its hogs at its expanding large-scale farms. The explosion in economic growth over the past couple of decades has made its population richer, with better living standards spurring meat consumption.
As big farms have increased, so has demand for soybeans that’ll be crushed to make feed for the pigs. China’s inbound shipments of the oilseed jumped almost 14 percent to a record 95.54 million tons in 2017. The nation’s soy imports are forecast to grow to an unprecedented 97 million tons in the 12 months ending September 2018, according to the U.S. Department of Agriculture. The country will account for 65 percent of global trade, the data show.
As the growing economy spurs construction of buildings and factories, China’s going to need more copper for the electrical wires and pipes that wind through its infrastructure. Domestic mines are often small and can’t keep up with the pace at which capacity for refining the metal is expanding, boosting demand for overseas purchases of concentrate.
China’s copper ore and concentrate imports rose 2.3 percent to a record 17.35 million tons in 2017. Demand growth for the overseas raw material will be sustained this year, according to Jia Zheng, a trader with Shanghai Minghong Investment Management Co.
Meanwhile, as more concentrate is converted to finished material within China, the nation’s unwrought copper and copper product imports have fallen, with shipments dropping 5.2 percent from a year ago.
— With assistance by Winnie Zhu, Jasmine Ng, Martin Ritchie, Dan Murtaugh, Sarah Chen, Jing Yang, and Shuping Niu
Investors Raise Bets on Surging Commodities as Oil Tops $70
By Kevin Crowley
Commodity investments rise to four-year high: Barclays
Oil, copper, zinc have all risen sharply in past month
Investors are betting there’s more to come from commodities after a surge in industrial metals and oil prices.
Assets invested in commodity-linked securities climbed to a four-year high of $311 billion after increasing 1 percent in December, according to Barclays Plc. Net inflows of $3.4 billion outweighed losses of $300 million last month, signaling bullishness.
“Rising manufacturing confidence in many regions continues to spur commodity demand growth,” Warren Russell, a New York-based analyst at Barclays, said in a note to clients. “Strong economic activity is set to continue in 2018.”
The return of global growth, manufacturing output and supply constraints have whetted investor appetites at a time when stock and bond valuations are high. Brent crude topped $70 a barrel in London on Thursday for the first time in three years, just days after zinc touched a 10-year intraday high. Copper’s turn was late last month, when it reached levels last seen almost four years ago.
Still, the big risk for commodities is, as ever, the world’s second-largest economy, Russell said. “China’s expected slowdown should mean that recent strength in oil and copper is unlikely to last.”
Shanghai copper dips as China imports slow in Dec
(Reuters) – Chinese copper futures eased on Friday after data showed a sharp decline in the country’s imports of the red metal in December.
China’s unwrought copper imports fell 4.3 percent in December from a month earlier, according to Chinese customs data.
But commodities traders said the decline was softened as imports still stood at the second-highest level in 2017 as winter restrictions on domestic production kept demand for metal from overseas buoyant.
* SHFE: The most-traded copper contract on the Shanghai Futures Exchange retreated 0.51 percent to 54,800 yuan ($8,464.63)a tonne.
* COPPER: Three-month copper on the London Metal Exchange was up 0.26 percent to $7,159.75 a tonne by 0700 GMT, reversing losses from the previous session.
* COPPER DROP FORECAST: Capital Economics said it expects copper to retreat as the year progresses, averaging just $6,800 a tonne in the first quarter and $6,250 in the second quarter.
* CHINA ALUMINIUM IMPORTS: China’s exports of unwrought aluminium and aluminium products rose for a second straight month in December, by 15.8 percent from November to 440,000 tonnes. That is also up 12.8 percent from the same month a year earlier.
Exports are now back to July levels after plummeting for four straight months before November’s rebound.
* CHINA: Tongling Nonferrous Metals Group, one of China’s top copper smelters, will suspend production at its Jinguan Copper unit for three days from Friday for repairs, a source familiar with the matter said.
* NEW GRASBERG PLAN: Indonesia hopes to finalise contract talks with Freeport McMoRan Inc over the Grasberg copper mine by June, although divestment issues are still unresolved, a mining ministry official said on Thursday.
* NICKEL: ShFE Nickel closed 1.76 percent down, while LME nickel recovered from an overnight selloff to trade 0.4 percent firmer at $12,675 a tonne.
* LME DEPARTURE: Paul MacGregor, head of sales at the London Metal Exchange, left his position earlier this month and has not yet been replaced, an LME spokesperson said, declining to give any further detail.
* OTHER METALS: The rest of the ShFE base metals complex ended weaker, with the exception of zinc, which was showing modest gains in step with overnight gains that saw three-month metal trade near decade highs. LME zinc was 0.44 percent higher at $3,401 a tonne.
Oil slips away from 2014 highs, though overall 2018 outlook remains firm
SINGAPORE (Reuters) – Oil prices on Friday slipped away from December-2014 highs reached the previous day.
Although analysts and traders have been warning of the risks of a downward price correction since the start of the year, they point out that overall market conditions remain strong, largely due to ongoing production cuts led by the Organization of the Petroleum Exporting Countries (OPEC) and Russia.
U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $63.34 a barrel at 0755 GMT, down 46 cents, or 0.7 percent, from their last settlement. WTI the day before rose to its strongest since late 2014 at $64.77.
Brent crude futures LCOc1 were at $68.97 a barrel, down 29 cents, or 0.4 percent, from their last close. Brent also marked a December-2014 high the previous day, at $70.05 a barrel.
Traders said relatively weak China December oil data had weighed on prices. China’s crude oil imports in December eased to 33.7 million tonnes, or 7.97 million barrels per day, versus 37.04 million tonnes in November, customs data showed on Friday.
Meanwhile, its December oil products exports hit a record 6.17 million tonnes, as refiners churn out more fuel than even thirsty China can absorb.
This has contributed to a fall in Singapore refinery profit margins DUB-SIN-REF to below $6 per barrel this month, their lowest seasonal level in five years.
As a result, some refiners have already scaled back their output, reducing demand for feedstock crude.
An expected rise in U.S. oil production C-OUT-T-EIA, currently at 9.5 million bpd, to above 10 million bpd soon has also weighed on prices, traders said.
Despite the lower prices on Friday, many analysts expect crude markets to remain firm this year, especially due to the OPEC-led production cuts.
“OPEC has acted successfully to reduce the inventory overhang and demand growth remains robust in the short term,” said Sanjeev Bahl, analyst at Edison Investment Research in a 2018 outlook.
The production cuts started in January last year and are set to last through 2018.
“There is potential for oil prices to move higher as inventories normalize,” Bahl said.
U.S. commercial crude oil inventories C-STK-T-EIA fell almost 5 million barrels in the week to Jan. 5, to 419.5 million barrels.
That’s slightly below the five-year average of just over 420 million barrels.
Fuel price hedging company Global Risk Management said in its 2018 outlook that “the likelihood of elevated oil prices this year seems imminent”, largely due to the ongoing supply cuts led by OPEC and Russia as well as political risk especially in Iran, Venezuela and Libya.
Taking into account price supportive and pressuring factors, a market survey of over 1,000 energy professionals conducted by Reuters in January showed crude oil price expectations clustered in a range of $60 to $70 per barrel for 2018.
“Oil market fundamentals for 2018 remain robust even if the upside to Brent prices from here is not especially clear,” U.S. investment bank Jefferies said.