Tailwind From Fed Minutes Propels Gold, Copper as Rate Fears Ebb

Why Has Demand for Gold Slumped in the Middle East?
  • Gold miners end longest losing streak since May 2015
  • Precious metals in New York and industrial metals on LME rise

The Federal Reserve is back to providing a tailwind for gold and copper, and most of the other industrial metals are coming along for the ride.

Minutes of the Fed’s meeting in July released Wednesday damped prospects for a U.S. rate hike this year, weakening the dollar and boosting the appeal of raw materials priced in the greenback, both to investors and physical buyers. Gold, which doesn’t offer yields, becomes more competitive in a low-interest-rate environment. A gauge of base metals rose for the third time in four days.

Gold has rallied 28 percent this year on mounting speculation rates in the U.S. will stay low for longer as other central banks around the world boost stimulus to support growth. Copper, which has struggled to gain traction this year, is also benefiting as decreasing odds of a rate increase weakened the dollar. Traders are pricing a 46 percent chance of a rate hike by December, down from 53 percent before the minutes were released on Wednesday.

“After the market had digested yesterday’s statement, they realized it was pretty dovish,” Bob Haberkorn, a Chicago-based senior market strategist at RJO Futures, said in a telephone interview. “We’ve seen a reflection of that in the weaker dollar, which is pushing the entire commodity complex higher. Gold looks like it’s going to have some follow-through here.”

Gold futures for December delivery gained 0.6 percent to settle at $1,357.20 an ounce at 1:48 p.m. on the Comex in New York. Copper futures for December delivery rose 0.7 percent to $2.1785 a pound. The metal is up about 2 percent this year after three straight annual losses.

For a QuickTake on gold’s price performance, click here.

The Fed minutes showed officials were split on whether to boost borrowing costs, with several saying they preferred to defer another rate hike until they were confident inflation was moving closer to 2 percent on a “sustained basis.”

Moody’s Investors Service raised its outlook for the global base-metals industry to stable from negative, saying growth prospects for China are helping support prices. The move reflects expectations that prices for aluminum, copper, nickel and zinc are unlikely to deteriorate further in the medium term, Moody’s said in a statement Thursday.

Moody’s also boosted its outlook for all entities within Rio Tinto Group to stable from negative, as it expects the company to generate “acceptable earnings” and remain focused on balance-sheet strength.

In other metals news:

  • A gauge of 14 senior global gold producers advanced, ending a five session slide that was the longest slump since May 2015. Gold Fields Ltd., Newcrest Mining Ltd., and Yamana Gold Inc. led the gains.
  • Silver futures also gained on the Comex, while platinum and palladium futures rose on the New York Mercantile Exchange.
  • On the London Metal Exchange, aluminum prices climbed to the highest in 13 months, before swinging to a loss. Copper, zinc, lead, tin and nickel advanced. The World Bureau of Metal Statistics reported Wednesday that all six saw deficits in the first half of 2016.
  • A gauge of 18 global base-metal producers rallied, led by Kaz Minerals Plc and Antofagasta Plc. Rio Tinto Group advanced 1.2 percent in London.
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