Friday, October 22, 2021

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Thursday, October 21, 2021

Gold price up after Fed official downplays chances of imminent rate hikes

 Gold price up after Fed official downplays chances of imminent rate hikes 

Gold prices rose for a second day in a row Wednesday following commentary from a Federal Reserve official that played down the possibility of imminent interest rate hikes.

Spot gold was up 0.7% to $1,783.70 an ounce by 11:50 a.m. EDT, near its weekly high. US gold futures also gained 0.7%, trading at $1,784.10 an ounce in New York.

[Click here for an interactive chart of gold prices]

Bullion has fluctuated recently as traders attempt to gauge the pace at which pandemic-era stimulus will be reined in by central banks.

Ongoing inflation, driven by the global energy crisis and supply chain constraints, has sparked widespread concerns that rate hikes could come sooner than expected, a painful prospect for the safe-haven metal.

However, recent mixed economic data from the US is casting doubts among investors about an early hike, which weakens the dollar and raises commodity prices.

On Tuesday, Fed Governor Christopher Waller told Bloomberg the US central bank should begin tapering its bond-buying program next month, though rate increases are probably “still some time off.”

He added that if inflation keeps rising at its current pace over the next few months, Fed policymakers may need to adopt “a more aggressive policy response” next year.

Upcoming speeches and discussions by officials including Randal Quarles, Mary Daly and Chair Jerome Powell will also be keenly watched ahead of the Fed’s meeting next month.

Hedge fund manager Paul Tudor Jones said in a CNBC interview on Wednesday that it’s time to double down on inflation hedges, including commodities.

“What they’re telling you by their actions, is that they’re going to be slow and late to fight inflation,” said the founder and chief investment officer of Tudor Investment Corp.

Tudor Jones also advised investors not to hold bonds due to increasing signals that the Fed will not be quick to fight inflation.

Bob Haberkorn, senior market strategist at RJO Futures, shared similar views in a Reuters report:

“There is a global concern on what is going on with supply crunches and the lack of action from the Federal Reserve. It seems like the Fed is behind the ball on inflation.”

“With supply chain and inflation issues, how will stocks continue to make new highs?” Haberkorn said, adding that “there is a flight to safety into gold that will go on for the next couple of months.”

Longer term, analysts still expect gold to face downward pressures as soon as the Fed starts reining in its monetary stimulus.

“Gold is trading above what we deem as fair value at this moment, and I believe this premium is due to the market pricing inflation fears,” Howie Lee, an economist at Oversea-Chinese Banking Corp., told Bloomberg.

“With the Fed due to begin monetary normalization, I still believe gold will face more downward pressure in the coming year.”

(With files from Bloomberg and Reuters)

Copper price surges past $11,000 on supply squeeze

 Copper price surges through $11,000 on supply squeeze 

The copper price continued to rally towards record highs on Tuesday as signs of extremely tight supply outweighed concerns that slowing growth in China will impact demand.

Traders were paying huge premiums for quickly deliverable copper after stockpiles in the London Metal Exchange’s (LME) warehouse system tumbled to their lowest level in decades.
Copper for delivery in December rose on the Comex market in New York, touching $4.8055 per pound ($10,572 per tonne), a record high.

CASH copper on the London Metal Exchange also soared to a new record high overnight. Spot copper jumped 7.2% to $11,299.50 per tonne.

Prices of the metal used in power and construction leaped 10% last week and are up and more than 30% this year after gaining 26% in 2020.

[Click here for an interactive chart of copper prices]

The spread between cash and three-month futures surged to over $1,000 a tonne on the LME on Monday, a premium not seen since at least 1994. The spread has been widening since early October as demand outpaced supply amid dwindling global exchange inventories.

Related read: Copper spread widens to most in more than 25 years on supply squeeze

“The LME notes recent price activity in the copper market,” the exchange said in an email to Bloomberg.

“We will continue to closely monitor the situation, and have further options available to ensure continued market orderliness if these are required.”

Copper’s short-term direction will depend on whether high premiums bring more metal into LME warehouses, alleviating the supply squeeze, said independent analyst Robin Bhar.

“It is not clear if low LME stockpiles point to a genuine shortage or if metal is available in private storage, but the copper’s longer term outlook is positive due to rising demand as the world moves from fossil fuels to copper-intensive electrification. The fundamentals are bullish.”

On-warrant copper inventories in LME-registered warehouses rose to 21,050 tonnes from 14,150 tonnes, the lowest in decades, on Friday.

 Copper inventories in Shanghai Futures Exchange warehouses at 41,668 tonnes are the lowest since 2009.

Fears of supply disruption also supported the market, as a Peruvian community promised to block a key mining road used by MMG’s Las Bambas copper mine in protest after failed negotiations with the Andean nation’s government.

Related: Peru community says will block key mining road used by MMG’s Las Bambas mine

(With files from Bloomberg and Reuters)