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COMMODITIES ROUND-UP : METALS NAD OIL June 19, 2018 at 07:50AM

COMMODITIES ROUND-UP : METALS NAD OIL

 

Gold prices gain as U.S.-China trade spat stokes safe-haven buying

Apeksha Nair

BENGALURU (Reuters) – Gold prices rose on Tuesday, supported by safe-haven buying, as an escalating trade spat between the United States and China sparked a sell-off in equity
markets.

Spot gold was up 0.45 percent at $1,283.62 an ounce by 0336 GMT.

U.S. gold futures for August delivery were also 0.5-percent higher at $1,286.10 per ounce.

The U.S. dollar and Asian stocks extended a global downturn after President Donald Trump threatened to impose a 10 percent tariff on $200 billion of Chinese goods in an escalating tit-for-tat trade war between
the world’s two biggest economies.

The dollar was down 0.3 percent against a basket of major currencies at 94.548, as well as hitting a one-week low versus the yen. Asian shares outside Japan slid 1 percent to their lowest level in over four months.

“There is a bit of panic as investors are looking for cover, especially from equity market, and as we know gold does offer that hedge,” said Stephen Innes, APAC trading head at OANDA.

Gold prices can gain during times of financial and political uncertainty as the metal is seen as a safe place to park assets, alongside the Japanese yen.

Spot gold may bounce moderately to resistance at $1,290 and then retest support at $1,277 per ounce, said Reuters technicals analyst Wang Tao.

Meanwhile, in other precious metals, silver climbed 0.5 percent to $16.48 an ounce, after hitting its lowest since June 5 at $16.39 in the previous session.

Platinum rose 0.1 percent to $882.50 an ounce, having dropped to a four-week low on Monday.

Palladium was down 0.2 percent at $987.81 an ounce, after marking its lowest since June 5 at $979.99 overnight.

Reporting by Karen Rodrigues and Apeksha Nair in Bengaluru; Editing by Richard Pullin and Joseph Radford

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London copper sours as U.S.-China trade spat escalates

London metals gave up early gains on Tuesday, while Shanghai contracts continued their fall following an extended weekend

By Melanie Burton, Reuters News

MELBOURNE – London metals gave up early gains on Tuesday, while Shanghai contracts continued their fall following an extended weekend after China said it would firmly respond
to any measures by the United States to widen tariffs on Chinese goods, escalating trade tensions between the world’s top two economies.

U.S. President Donald Trump threatened to impose a 10 percent tariff on $200 billion of Chinese goods late on Monday and China responded on Tuesday to say it would fight
back firmly with “qualitative” and “quantitative” measures.

“Yes there are many clouds on the horizon with regards to trade,” said Dominic Schnider, an analyst at UBS Wealth Management.

“(But) we are still looking for the global economy to grow at or above trend.”

Strong manufacturing and exports out of Europe and resilient property and industrial activity in China reflect solid copper demand which could rise further if China eases its monetary policy, he said. Labour talks
in top producer Chile and the likelihood that miners will fall short of production are supporting supply.

UBS Wealth management sees copper in $7,600-$8,000 range in three to six months.

FUNDAMENTALS

COPPER: London Metal Exchange copper erased modest early gains to turn flat at $6,965 a tonne by 0257 GMT, sliding back towards two-week lows plumbed on Monday at $6,886.75.

SHFE: The Shanghai Futures Exchange reopened after a long holiday weekend, reflecting losses seen late last week on simmering trade U.S. China trade concerns. Shfe copper was down 1.7 percent at 52,800 yuan ($8,192)

ALUMINIUM TARIFFS: The U.S. Commerce Department has determined that Chinese common alloy aluminium sheet products are being sold in the U.S. market at less than fair value and will be subject to preliminary anti-dumping
duties of 167.16 percent, the Aluminum Association said on Monday.

CHINA POLICY: Having reduced the amount of reserves that lenders must hold just two months ago, China’s central bank could soon do it again to support a slowing economy and contain risks posed by corporate debt
defaults, policy sources said.

Another cut would support metals by increasing lending activity.

CHINA PMIS: Growth in China’s manufacturing sector unexpectedly picked up to a four-month high in December as factories cranked up production to meet a surge in new orders, a private business survey showed on
Tuesday.

COMING UP: U.S. Building permits, Housing starts for May at 1230 GMT

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Goldman Sachs Affirms Bullish View On Oil Prices

By Tsvetana Paraskova

Despite expectations that OPEC and Russia will likely decide to boost production this week, Goldman Sachs continues to have a very bullish view on oil prices, with strong
demand growth and further supply losses pointing to continued declines in inventories and higher oil prices for the rest of the year.

“Our updated global supply-demand balance continues to point to further declines in inventories and higher oil prices in 2H18,” the investment bank said on Monday, as carried
by Reuters.

Goldman kept its forecast that Brent Crude will hit $82.50 a barrel this summer and will end 2018 at $75 per barrel. At 06:01 EDT a.m. on Monday, Brent Crude had risen 0.68 percent at $73.94. Further increases
to the Brent benchmark came in the afternoon, reaching $74.79 by 1:12pm EDT.

The bank has been bullish on oil for several months, and at the end of May it affirmed its summer peak forecast of $82.50 a barrel Brent, despite the price correction following the first reports that Saudi Arabia
and Russia were looking to reverse some of the cuts. Back then, Goldman believed that the current market deficit, robust demand, and the rising levels of disruptions were setting the stage for inventories to drop further this year.

Three weeks later, when the market is largely expecting OPEC and allies to decide to boost production at this week’s meeting, Goldman continues to hold a bullish view.

“We see the Brent moves since May 24 as pricing-in a higher level of OPEC and Russia production increase than we and consensus are expecting,” according to the bank’s analysts.

Goldman expects OPEC and its Russia-led allies to increase production by 1 million bpd by the end of this year, and by another 500,000 bpd next year, but it sees strong demand and more supply losses from Venezuela
and losses from Iran offsetting the production boost.

“Our updated fundamental oil balance shows…that the oil market remains in deficit with resilient demand growth and rising disruptions requiring higher core OPEC and Russia production to avoid a stock-out by
year-end.”

By Tsvetana Paraskova for Oilprice.com

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Oil Prices Fall as OPEC Considers Production Increase Before Key Meeting This Week

Investing.com – Oil prices fell on Tuesday on reports that Organization of Petroleum Exporting Countries (OPEC) members are considering an agreement that delivers 300,000
to 600,000 barrels a day of additional supply to global markets over the next few months, according to reports that cited people briefed on the talks.

Crude Oil WTI Futures for August delivery were trading at $65.33 a barrel at 1:10AM ET (05:10 GMT), down 0.55%. Brent Oil Futures for August delivery, traded in London, were
also down 0.68% at $74.83 per barrel.

Meanwhile, Shanghai Crude Oil WTI Futures for September delivery were down 1.9% at 459.40 yuan per barrel on Tuesday

The OPEC is expected to agree to raise production along with Russia and other producers after a key meeting in Vienna later this week.

“In our view, any production increase effectively signals that the cuts have an end date. In contrast, our recent discussions with clients indicated a growing view that the cuts may last through 2019 and perhaps
beyond 2020,” Macquarie said in a research report.

Goldman Sachs, on the other hand, believes this week could bring on a bullish, or positive, surprise for oil prices.

“Despite little clarity on the outcome of this meeting, this implied move is in line with the average of the past nine OPEC meetings, including three meetings since 2016 that were unconsequential. This suggests
that the option market may be underpricing the event risk,” the Goldman analysts wrote.

Oil prices were also under pressure on Tuesday after U.S. President Donald Trump said on Monday that he has ordered the U.S. Trade Representative to identify $200 billion worth of China goods for additional tariffs,
escalating a trade dispute between the world’s two largest economies.

 

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