Gold Down, Silver Up Along With Copper

As another Federal Reserve member turns hawkish, the US dollar regained some of its losses from earlier in the day, while gold took a bigger hit falling almost $10 again today. Gold is now trading in the red for a week touching 1220.15 and touched a low for the day at 1217.50. Silver surprisingly diverged from gold to gain 46 points to trade at 16.300. Industrial metals traded in the green on Wednesday helping silver to realize gains. Platinum followed gold falling a matching $10 to 994.25 breaking below the $1000 support level. In Asia on Thursday morning traders took advantage of the declines in gold to buy up the cheaper metal adding $6 to reach 1229 but those gains are expected to diminish as we move into the European session.

Patrick Harker, President of Federal Reserve Bank of Philadelphia, reiterated again on Wednesday that he could easily see FED raising interest rates two to three times this year, joining the band of policymakers at U.S. Federal Reserve warning on market pessimism over rate hikes.
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“Although I cannot give you a definitive path for how policy will evolve, I can easily see the possibility of two or three rate hikes over the remainder of the year,”

He, however, like every one of his colleagues stressed that FED hike should be data dependent, since many times rate hikes have been associated with weaker economic outcomes and FED doesn’t want that.

The list now includes, Boston FED chief Rosengren, Atlanta FED chief Lockhart, Kansas City FED chief George, San Francisco FED chief Williams and now Philadelphia’s Harker, who have either warned of hikes in next few meetings or two-three rate hikes this year. Market is eagerly awaiting the speeches of FED Chair Janet Yellen scheduled for this Friday and on June 6th to pin down their expectations.

Gold slid 1.7 per cent last week, extending a drop from the highest in more than a year, as minutes of the Fed’s April meeting indicated that US rates may be increased sooner than previously thought. Higher borrowing costs reduce the appeal of owning non-interest-bearing assets and tend to strengthen the dollar, cutting demand for gold as an alternative investment.

“The surprisingly hawkish FOMC minutes last week, which highlighted a June rate rise is back on the cards, has seen the dollar and Treasury yields advance, making life tougher for gold,” Jonathan Butler, a precious metals strategist at Mitsubishi Corp in London, said by e-mail. The Fed may still delay moves as it seeks greater clarity on the economy’s strength, he said.

US new home purchases rose almost 17 percent, government figures showed pointing to a robust spring selling season for builders. Construction accounts for 30 percent of global demand for copper, according to Nick Pickens, senior research manager at Wood Mackenzie. Orders to remove copper from warehouses tracked by the London Metal Exchange climbed 37 percent, the most since January. Copper as well as most industrial metals gained.  Copper climbed to 2.10 up by 30 points today.  Last year, Deutsche Bank also cut its copper projections due to weak Chinese demand. DB also expects rising supply in 2016 on new mine commissions, which could cause copper to “remain vulnerable to periodic bouts of shorting.”

China, the world’s second largest economy, has been grappling with weaker growth, raising concerns over its ability to maintain previous levels of demand for raw materials, like copper.