Copper Could Break Below $2 While Gold To Heads To Multi Year Low

Gold followed the global commodities decline in the Asian session on Monday morning. Gold tumbled $5.90 to trade at 1070.40 while silver fell 96 points to 14.00 and could break below the support level and fall in the $13 level. Platinum gave up $4.75 to 850.65. Gold extended losses on Monday, falling towards a near-six-year low reached last week, pressured by a robust dollar and upbeat comments from Federal Reserve officials on a possible US rate hike next month.

The dollar has gained 11 percent this year, according to Intercontinental Exchange Inc.’s U.S. Dollar Index. The gauge rose 0.4 percent to 99.95 Monday, approaching the 100.39 level reached in March that was the strongest since April 20003. It will drop 2.2 percent to 97.4 by the end of the year, according to the median estimate in a Bloomberg survey.

Comments by high-ranking Fed officials on the dollar’s level and monetary-policy decisions have become more explicit and formal.

The decision to delay raising rates has helped offset headwinds caused by a strengthening dollar, Fed Vice Chairman Stanley Fischer said in a Nov. 12 speech. Restrained growth owing to the dollar will persist well into next year and spell continued weakness in the traded-goods-producing sectors, he said.

The strength of the US dollar is weighing down the global commodities markets, with copper falling 45 points to 2.015 its lowest point this year. Last week copper prices were also weak but a got a bump when Chinese reducing some of its lending rates. The commodity has been hit by several headwinds including a strong US dollar, weak crude prices and rising supply from industry heavyweights. However, it is demand that’s at the forefront of investors’ minds at the moment as China transitions away from an export-led economy.

Just last week the China Iron and Steel Association warned steel supply in the country may drop 2.9 per cent next year, hampering demand for iron ore and casting fresh doubt on forecasts from mining giants Rio Tinto and BHP Billiton.

Volatile commodity prices drew plenty of attention on Friday night through an end-of-week session devoid of major economic news. A decision by top Chinese smelters to trim output next year led zinc to rebound as much as 6 per cent from Thursday’s six-year low, before settling 2.5 per cent higher.

The action briefly flowed through to a recovery for base metals on the closely-watched London Metals Exchange, but the euphoria faded as copper slid 1 per cent to a new six-and-a-half-year nadir and nickel tumbled 2.4 per cent to its weakest close since 2003. Aluminium also touched a six-year trough, ending down 1.2 per cent, while lead tacked on 0.5 per cent. Key commodities continue to trend lower as investors fret about fading Chinese demand in the face of a push from Beijing to transition the economy away from export-led growth.