Gold extends its fall, as Jerome Powell’s comments lift dollar
Bengaluru — Gold prices fell for the third day running on Thursday, weighed down by a stronger dollar, while investors awaited the second session of Federal Reserve chairman Jerome Powell’s testimony before the Senate banking committee later in the day.
Spot gold was 0.2% lower at $1,314.64 an ounce at 4.44am GMT. Prices have fallen about 1% so far this week. US gold futures were down 0.2% at $1,315.40/oz.
The dollar index, which measures the greenback against a basket of major currencies, was up 0.1% at 90.7. It had earlier touched its highest since January 19 at 90.744.
“Dollar firmness continues to weigh on gold but (the metal) found some support on weakness in equities,” said a Hong Kong-based trader.
The US currency, which in February recorded its best monthly performance since November 2016, has been bolstered by Powell’s hawkish stance on the US economy, which has fuelled expectations of interest rates being raised four times this year rather than three.
Higher interest rates tend to boost the dollar and push bond yields up, making greenback denominated, non-yielding gold more expensive for holders of other currencies.
The gold market is keenly waiting for the second round of Powell’s testimony.
“There’s a chance he dials back his hawkish rhetoric, but if he stays the course, there’s always a chance we could see higher repricing of US interest rates and a slightly firmer dollar, which could trigger another leg lower in gold prices,” Stephen Innes, Asia-Pacific trading head at Oanda, said in a note.
US economic growth slowed slightly more than initially thought in the fourth quarter, after the strongest pace of consumer spending in three years depleted inventories and drew in imports as businesses struggled to produce enough goods and services.
Meanwhile, Asian stocks skidded on Thursday after the Fed chief’s comments revived fear about the pace of US monetary tightening this year, amid concern that higher borrowing rates could crimp corporate activity and cool economic growth.
Reuters technical analyst Wang Tao said spot gold continued to target $1,303 as it had more or less broken a support at $1,317.
Among other precious metals, silver fell 0.3% to $16.35 an ounce.
Platinum fell almost 1% to $973.50 an ounce, while palladium was flat at $1,042.47 an ounce.
Shanghai copper slides, but other metals rise after upbeat China data
Shanghai copper prices fell for a fourth day on Thursday to touch their lowest level in more than two weeks as the dollar strengthened and stock markets declined, but other metals gained ground after upbeat manufacturing data from top consumer China.
The private Caixin/Markit Manufacturing Purchasing Managers’ Index for February beat expectations to reach its highest in six months, a day after China’s official factory activity reading raised concerns of a sharper-than-expected slowdown in the world’s second biggest economy this year. “The impact was probably the result of ongoing production constraints due to the environmental controls in China,” ANZ said of the offical PMI reading.
* SHFE COPPER: The most-traded copper contract on the Shanghai Futures Exchange had slipped 0.5 percent to 52,490 yuan ($8,280.49) a tonne by 0459 GMT. It earlier touched its lowest since Feb. 13 at 52,120 yuan a tonne, and is down 2 percent so far this week.
* LME COPPER: Three-month copper on the London Metal Exchange rose 0.4 percent to $6,956 a tonne, having fallen by 1.3 percent in both the two previous sessions. It earlier marked $6,905, also its lowest since Feb. 13.
* OTHER METALS: Shanghai zinc and nickel shrugged off early losses to turn positive after the Caixin/Market PMI survey came out, rising 0.2 percent and 0.3 percent respectively.
* MONGOLIA: The Oyu Tolgoi copper and gold mine in Mongolia’s southern Gobi Desert will lift force majeure effective March 1 and majority owner Turquoise Hill Resources Ltd said on Wednesday that it expected to make up any sales-related effects over the next few quarters.
* VALE: Brazil’s Vale , the world’s No.1 nickel producer, plans to save well over $150 million by reducing costs across its nickel operations, which have notched positive cash flow for the past two months, company executives said.
* SOUTH AFRICA: South Africa’s new mining minister Gwede Mantashe said on Wednesday he would finalise the latest version of an industry charter which lays out requirements for black ownership levels and other targets in the next three months.
Oil rises after 2-day fall, gains limited by stronger dollar
By Osamu Tsukimori
(Reuters) – Oil prices edged up on Thursday after sharp falls in the previous two sessions, though gains were limited as some investors shied away from riskier assets amid volatile equity markets and a stronger dollar.
Both global benchmark oil futures fell sharply on Wednesday after government data showed a larger-than-expected rise in U.S. crude inventories.
Brent crude for May delivery, the new front-month contract, was up 17 cents, or 0.3 percent, at $64.90. The April contract expired on Wednesday, down 1.3 percent.
Both benchmark contracts fell nearly 5 percent in February, the first monthly declines in six months.
“An extended large decline in equities has been prompting investors to avoid risk assets such as oil,” said Tomomichi Akuta, senior economist at Mitsubishi UFJ Research and Consulting in Tokyo.
Some industry sources said Wednesday’s drop was also due to profit-taking by market participants at the end of the month after oil hit a three-week high earlier this week.
Meanwhile, oil has been under pressure as the dollar index rose to a five-week high.
U.S. crude inventories rose by 3 million barrels last week, compared with analyst expectations for a build of 2.1 million barrels, weekly data by the Energy Information Administration (EIA) showed.
Gasoline stocks also rose by 2.5 million barrels against expectations for a 190,000-barrel drop.
Soaring U.S. crude output has also kept a lid on oil prices this year, even though producers, led by the Organization of the Petroleum Exporting Countries and Russia, have reduced output.
U.S. crude oil production rose to a record 10.057 million barrels per day (bpd) in November and retreated slightly in December to 9.949 million bpd, the EIA said on Wednesday.
“Despite the expanding output curbs by OPEC and non-OPEC members such as Russia, the market has been focusing more on rising U.S. output since around late January,” Akuta added.
OPEC, meanwhile, is doing its part to counter U.S. output. The group’s oil production fell in February to a 10-month low, a Reuters survey found on Wednesday.
Oil prices may find some support as the U.S. is considering oil-related sanctions on OPEC member Venezuela to pressure its socialist President Nicolas Maduro, a U.S. official said on Wednesday.