Metals Pull Back as Dollar Climbs
March 02 2017 - 7:06AM
Dow Jones News
By Ed Ballard
LONDON--A resurgent dollar weighed on base and precious metals
prices on Thursday.
Copper was down 0.2% at $6,002 a ton, with other industrial
metals from aluminum to zinc losing between 0.1% and 0.5%. Gold was
down 0.4% at 1,243.95 a troy ounce in late-morning trade, with
silver, palladium and platinum down between 0.3% and 0.5%.
Gold's losses were kept in check by political uncertainty in the
U.S. and Europe, while continuing supply disruption supported
copper.
The WSJ Dollar Index was recently up 0.3%, its highest level
since mid-January. The dollar is rising on expectations that the
Federal Reserve will raise interest rates given strength in the
U.S. economy.
As of Wednesday, markets were allocating a roughly two-thirds
chance that the Fed will raise rates at its March 15-16 meeting, up
from a 35% chance on Tuesday, according to data from CME Group.
A stronger dollar makes dollar-priced commodities more expensive
for holders of other currencies. In the case of gold, higher rates
can also reduce demand by increasing the returns on offer from
yield-bearing assets.
The U.S. trading session will bring jobless claims statistics
and a speech from Loretta Mester, president of the Federal Reserve
Bank of Cleveland, who may join the chorus of Fed officials saying
growth, inflation and employment in the U.S. warrant tighter
monetary policy.
But despite the pressure from a stronger dollar, gold is holding
on to its gains for the year. The metal is currently not far below
its 2017 peak, when it topped $1,260 an ounce on Feb. 24.
"There is still a significant amount of underlying risk in the
markets right now--largely political--which may explain why gold--a
traditional safe haven asset--is only trading 1.5% below its
near-four month high," wrote Craig Erlam, an analyst at Oanda
Corp.
Analysts at Commerzbank said the precious metal is "holding its
own amazingly well," saying demand is kicking in whenever the
market dips. The bank also noted continuing inflows of money into
exchange-traded funds that buy gold.
Copper continued to be buoyed by supply disruption at two huge
mines. Commerzbank estimated that 60,000 tons of production have
been lost due to a strike at the Escondida copper mine in Chile.
Violent clashes between workers and the police were reported
Thursday as the strike enters its fourth week.
Freeport-McMoRan Inc. remains locked in a standoff with the
Indonesian government over permission to export copper concentrate
produced at the Grasberg mine.
Brokerage firm Marex Spectron said the copper market is
susceptible to some vicious moves making holding intraday positions
difficult.
Write to Ed Ballard at ed.ballard@wsj.com
(END) Dow Jones Newswires
March 02, 2017 06:51 ET (11:51 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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