COMMODITIES ROUND-UP : METALS AND OIL
Gold Prices Rise to One-week High on Weaker Dollar
Investing.com – Gold prices rose to a one-week high on Wednesday as a softening dollar supported buying in the yellow metal.
Gold futures for August delivery on the Comex division of the New York Mercantile Exchange gained 0.44% to $1,259.00 a troy ounce by 1:30AM ET (05:30 GMT).
The U.S. Dollar Index, which tracks the greenback against a basket of six major currencies, stood at 94.536 on Tuesday, down 0.1%.
Dollar-denominated assets such as gold are sensitive to moves in the dollar – A fall in the dollar makes gold less expensive for holders of foreign currency and thus, increases demand for the precious metal.
Trade concerns remained in focus as traders await the July 6 deadline when the U.S. trade tariffs on $34 billion in Chinese goods are due to take effect. In response, China has announced that it would retaliate
with duties on the same value of U.S. products.
“Gold now has the potential to move back up to the $1,300 level, given market expectations appear to be becoming less hawkish on the interest rate outlook,” said Alasdair Macleod, head of research with Toronto-based
Trading activity is expected to be light however, as the U.S. markets are closed on Wednesday for the Independence Day holiday.
“Today, there’s very little happening ahead of the fourth of July holiday, but we are seeing some significant U.S. dollar weakness come across the board against other currencies,” a Sydney-based trader said.
In other precious metal trade, silver futures gained 0.42% to $16.110 a troy ounce, while platinum futures fell 0.11% at $843.40 an ounce.
Looking ahead, investors are also awaiting minutes of the June U.S. Federal Reserve meeting which is due on Thursday and the U.S. non-farm payrolls data on Friday.
SHFE base metals prices broadly lower; aluminium finds support
Base metals prices on the Shanghai Futures Exchange were broadly down during Asian morning trading on Wednesday July 4, with copper prices sliding to a near two-month low
amid weakness in the yuan versus the dollar and an uptick in trade tensions between the United States and China.
The most-traded August copper contract on the SHFE slid to 50,840 yuan ($7,630) per tonne as at 10.06am Shanghai time, down by 590 yuan per tonne or 1.2% from Tuesday’s close.
A stronger dollar versus a weakened yuan has been a key driver behind the weakness of red metal prices over the past few weeks.
The dollar index has hit fresh highs in recent days, reaching 95.14 on July 2, before softening on muted appetite from investors ahead of the Independence Day holiday in the US on Wednesday.
Meanwhile, the persistent depreciation of the yuan against the dollar has further dampened sentiment toward the base metals in China.
According to exchange rate website Oanda.com, $1 was worth 6.66 yuan on Wednesday, compared with 6.45 yuan two weeks ago.
“The weakness in the [yuan] has been a contributing factor to the recent weakness in base metals. In fact, the negative correlation between copper and USD/CNY exchange rate has reached its highest level since
2012,” ANZ Research noted on Wednesday.
In addition, an uptick in US-China trade tensions overnight added to the murky outlook for the base metals, further denting market sentiment.
“Overnight a Chinese court issued a temporary injunction banning [US-headquartered] Micron Technology from selling its products in the semiconductor market there…It comes after the US moved to block China Mobile
from entering its telecommunications market on national security grounds,” ANZ Research said.
“Market participants remain concerned about the escalation in US-China trade tensions. Additionally, [London Metal Exchange] copper prices have breached $6,500 per tonne and are likely to trend toward $6,350 per
tonne,” Citic Futures Research said on Wednesday.
Meanwhile, aluminium was the only base metal on the SHFE to record a gain – albeit a marginal one – during the early Asian session on Wednesday.
The most-traded August aluminium contract price on the SHFE edged up to 14,045 yuan per tonne as at 10.06am Shanghai time, up 20 yuan per tonne or 0.1% from Tuesday’s close.
Light metal prices have been supported by the continuous decline in SHFE stocks, despite the aluminium market being in its traditionally weak period for consumption.
Deliverable aluminium stocks at SHFE-approved warehouses fell for a seventh consecutive week in the week to June 29, with inventories declining by 5,443 tonnes to 936,194 tonnes – a three-month low.
Other metals weaker
The SHFE August zinc contract fell 495 yuan per tonne to 22,705 yuan per tonne.
The SHFE August lead contract retreated 150 yuan per tonne to 19,965 yuan per tonne.
The SHFE September nickel contract slid 2,400 yuan per tonne to 113,690 yuan per tonne.
The SHFE September tin contract fell 460 yuan per tonne to 145,180 yuan per tonne.
Copper bounces off 9-month low after China calms markets
London copper climbed nearly 1% on Wednesday to recover from a nine-month low
By Manolo Serapio Jr, Reuters News
MANILA – London copper climbed nearly 1 percent on Wednesday to recover from a nine-month low and other metals also pulled away from their weakest level in months after China’s
central bank assured markets it would keep the yuan stable.
The Chinese currency slid to 11-month lows on Tuesday with investors on edge ahead of the July 6 deadline when U.S. tariffs on $34 billion worth of Chinese goods take effect.
Beijing has said it would retaliate with tariffs on U.S. products.
People’s Bank of China Governor Yi Gang said the central bank was closely watching fluctuations in the foreign exchange market and would seek to keep the yuan at a stable and reasonable level.
“The statement puts paid to any fears that the PBoC could be engineering a depreciation to cushion the economy,” Mizuho Bank said in a note.
ANZ analysts said the yuan’s slide has contributed to the recent weakness in base metals, citing that “the negative correlation between copper and USD/CNY exchange rate has reached its highest level since 2012.”
Three-month copper on the London Metal Exchange was up 0.9 percent at $6,548 a tonne by 0233 GMT, versus Tuesday’s low of $6,490, its weakest since October. On the Shanghai Futures Exchange, the most-traded copper
slipped 0.9 percent to 50,850 yuan ($7,670) per tonne.
OTHER METALS: LME aluminium rose 1.7 percent to $2,115 a tonne after hitting a three-month low of $2,079.85 overnight. Zinc gained 0.3 percent to $2,797.50, having touched an 11-month low of $2,778 on Tuesday.
CHINA SEEKS ALLIES: China is putting pressure on the European Union to issue a strong joint statement against President Donald Trump’s trade policies at a summit later this month but is facing resistance, European
CHINA DATA: Growth in China’s services sector accelerated in June to a four-month high, buoyed by a pickup in new businesses and a sustained increase in employment, a private survey showed.
GLENCORE: U.S. authorities have demanded Glencore hand over documents about its business in the Democratic Republic of Congo, Venezuela and Nigeria as part of a corruption probe, sending the mining company’s shares
down more than 8 percent.
FREEPORT: Indonesia has extended the operating permit of copper miner Freeport McMoRan Inc’s local unit, PT Freeport Indonesia, to July 31, 2018, as discussions over longer term rights to its Grasberg mine are
CURRENCIES: Major currencies marked time while the Chinese yuan recovered from 11-month lows, after efforts by authorities the previous day to calm financial markets which had been rattled by worries about trade
Oil inches up on tighter US supply & looming Iran sanctions
SINGAPORE (Reuters) – Oil prices edged up on Wednesday following a report of tightening U.S. fuel inventories amid an outage at Syncrude Canada oil sands facility in Alberta,
which usually supplies the United States.
Prices were also pushed up by looming U.S. sanctions against Iran, which threaten to cut supplies to an already tight market despite pledges by producer cartel OPEC to raise
output to make up for the disruptions.
U.S. West Texas Intermediate (WTI) crude futures CLc1 had risen 37 cents, or 0.4 percent, to $74.51 a barrel by 0650 GMT, compared with their last settlement. On Tuesday,
WTI hit its highest since November 2014 at $75.27.
Brent crude futures LCOc1 were changing hands at $78.04 per barrel, up 28 cents, or 0.4 percent, from their last close.
Trading activity is expected to be limited on Wednesday by the U.S. Independence Day holiday.
U.S. crude inventories fell by 4.5 million barrels to 416.9 million barrels in the week to June 29, the American Petroleum Institute (API) said on Tuesday. Gasoline and distillate stocks, which include diesel
and heating oil, also fell, the API said.
“The draw in distillates was against expectations,” said Sukrit Vijayakar, managing director of energy consultancy Trifecta.
The decline in fuel inventories was largely down to the outage at Syncrude Canada’s 360,000 barrels per day (bpd) oil sands facility near Fort McMurray, Alberta. The outage is expected to last through July.
But brokerage Phillip Futures said the lower stocks come “as gasoline demand spikes on peak driving season in the northern hemisphere”.
Outside North America, looming U.S. sanctions against major oil exporter Iran were the focus of attention.
The U.S. government has demanded that all countries stop buying Iran’s oil from November.
To make up for potential shortfalls in supply from Iran and other disruptions including in Libya and Venezuela, the Organization of the Petroleum Exporting Countries (OPEC) has agreed with Russia and other oil-producing
non-OPEC members to raise output from July.
OPEC-member Iran, however, has warned it would not accept other producers reaping the benefits by taking its market share.
Iran’s President Hassan Rouhani on Tuesday said it was “unwise to imagine that some day all producer countries will be able to export their surplus oil and Iran will not be able to export its oil”.
Reporting by Henning Gloystein; Editing by Joseph Radford and Neil Fullick