COM: Gold pauses after sharp declines, copper firm
Spot Gold prices paused today after a sharp decline yesterday as weakness in the dollar provided some support to prices. Prices fell yesterday as the dollar strengthened and as Barack Obama announced banking curbs in investment and trading.
Markets still remain concerned that the economic recovery may have been backed by the stimulus support measures by global policymakers and the impact may not be visible in the immediate future. These concerns in the financial markets may reduce risk appetite of investors and lead to selling pressure in higher-yielding and riskier investment assets.
Copper prices firmed on Friday as a weaker dollar and a decline in inventories helped to stabilize the red metal. Copper inventories on the LME declined marginally by 450 tonnes to touch 534,200 tonnes today. But prices could trade with a negative bias as China’s overheated economy is tightening its lending norms.
This could be a bearish factor for base metals as China is the driver for base metals demand and curb in credit could affect demand for the commodities. Prices could slip further as concerns are growing that China will take more measures to temper expansion after it reported its fastest quarterly growth in two years. China’s move could impede a still weak global economic recovery and curb its insatiable demand for commodities.
Crude Oil prices traded little changed today but are poised for a second weekly decline after the US Energy Department reported that refineries in the US cut processing in response to lower fuel demand. Oil prices could continue to trade with a negative bias as demand concerns will add pressure on prices. The dollar could trade with a positive bias as risk aversion in the financial markets could reduce demand for higher-yielding and riskier investment assets. Demand concerns in the case of crude oil could lead to downside pressure on prices.
Outlook
There is no economic data announcement from the US today and commodity prices will take cues from the movement in the dollar. After a long stretched rise, the dollar has succumbed to the bears but risk aversion in the financial markets could lead to strength in the dollar.
Prices of copper could come under pressure on the back of a stronger dollar and concerns over China’s monetary policy tightening. Gold prices could also come under pressure if the dollar strengthens in the later part of the trade. Demand concerns in the case of crude oil could lead to selling pressure in the commodity.
