Yellen Reignites Commodities Rebound From Gold to Copper

Gold Still Crushing It in 2016
  • Teck leads mining-stock gains as Freeport-McMoRan climbs
  • All six main metals traded on LME advanced; zinc up 5%

Federal Reserve Chair Janet Yellen’s dovish message reignited a commodities rebound that pushed up everything from gold and copper to miners including Teck Resources Ltd. and Freeport-McMoRan Inc.

The Fed on Wednesday signaled it won’t raise interest rates as much this year as forecast in December amid weakening global economic growth, sending gold prices surging just after futures capped the longest slump since November. A gauge of 14 gold miners climbed to the highest in more than a year, while the Bloomberg Americas Mining Index surged to an eight-month high. 

“With loose monetary policy and low rates, we’ll have a lot of money out there in the system and demand will be higher,” Bob Haberkorn, a senior market strategist at RJO Futures in Chicago, said in a telephone interview. “The miners are benefiting from this because the trends on the physicals do look to be higher, whether it be gold, platinum, silver, copper or any of the other base metals for that matter.”

After advancing this year through early March as turmoil in financial markets helped boost demand for the metal as a store of value, gold’s rally had been sputtering. Futures posted losses in seven of the past eight sessions, as signs of an improving U.S. economy rekindled speculation that rate increases were looming. In dialing back expectations, the Fed said economic and financial developments continue to pose risks.

Odds Shrink

QuickTake The Rise and Fall of Gold

Gold futures for April delivery advanced 2.9 percent to settle at $1,265 an ounce at 1:52 p.m. on the Comex in New York, ending four straight sessions of losses that was the longest slump for a most-active contract since Nov. 6. The BI Global Senior Gold Valuation Peers index climbed 4.2 percent.

Vancouver-based Teck Resources rose 16 percent, the biggest advance on the Bloomberg World Mining Index. Phoenix-based Freeport added 6 percent, among the best performances on the Standard & Poor’s 500 Index of equities.

The Fed kept the target range for the benchmark rate at 0.25 percent to 0.5 percent, according to a statement Wednesday following a two-day meeting. Policy makers’ updated projections implied two quarter-point increases this year, down from four forecast in December. Odds of an interest-rate increase in June fell to 37 percent, from 54 percent on Tuesday. 

Investors increased holdings in exchange-traded funds backed by the metal for a second day, the total jumping 0.2 percent to 1,738.3 metric tons, according to data compiled by Bloomberg as of Wednesday.

“The Fed was more dovish than the market expected, and we’ve seen market expectations of a Fed rate move pared back,” said Grant Sporre, an analyst at Deutsche Bank AG in London. “Gold is no longer going to $1,000 and the longer the Fed stays dovish, the better for the metal.”

In other metals:

  • Silver and copper futures climbed on the Comex in New York, while palladium and platinum advanced on the New York Mercantile Exchange.
  • All the six main metals traded on the London Metal Exchange, led by zinc, which climbed 5 percent. 
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