Copper Could Take Years To Recover While Gold Turns Bearish

Gold is slowly returning to its bearish trend after soaring late last week after the Federal Reserve minutes indicated that a September rate increase was not in the bag. Gold soared above the $1156 price and has been slowly easing down ever since. Gold is trading at 1127.10 in the Asian session.  Silver added 89 points after its harsh declined on Wednesday and is trading at 14.130 as platinum soared $11.65 to 994.20.

Gold steadied this morning after suffering its biggest fall in five weeks in the prior session as stock markets recovered, but indications that a US rate hike might happen later than expected kept a floor under prices. Cheered by Wall Street’s rebound, Asian stocks rose led by Chinese markets whose deep tumble this week fed a global rout. “Gold has been correlated a lot with stock markets in the past couple of days due to the fear globally,” said Howie Lee, an analyst at Phillip Futures in Singapore. “It’s not surprising to see gold come back off as stocks stabilize.”

Providing some support to gold were comments by New York Fed President William Dudley on Thursday that the prospect of a September rate increase looks “less compelling” given the threat posed to the US economy by recent market turmoil. “The world is in no state to endure a rate hike from the US at this point. It will just cause further collapse in the stock markets,” New York Fed President William Dudley, a pivotal member of Fed Chairwoman Janet Yellen’s inner circle, backed away Wednesday from supporting an interest-rate hike at the U.S. central bank’s September meeting.

Gold dipped yesterday as equities bounced back after China eased monetary policy further to support a faltering economy and stock markets that had fueled this week’s global rout.

Palladium climbed 1.7 per cent to 540.22 an ounce after tumbling more than 6 per cent overnight, its steepest fall since April 2013. The metal, mainly used in emissions control systems for cars, trucks and other vehicles, hit a five-year trough of 528.50 on Tuesday and has lost around 9 per cent so far this week.

Copper bounced back 20 points to 2.2833 but remains near the bottom of its trading range after hitting a 6 ½ low. Copper futures strengthened on Thursday after a sharp rebound in Chinese equity markets helped calm investors hit by worries over China’s faltering economy. China’s major stock indexes rose on Thursday following on from a strong rebound on Wall Street.

The lift helped distance the benchmark London Metal Exchange copper contract further from the six-year lows plumbed earlier in the week amid heightened concerns China was headed for a hard landing. The price of the red metal has fallen 30 percent since the start of the year and 50 percent from its 2010 high

CEO of Hudbay Minerals David Garofalo tells BNN that demand has little influence in the current copper price environment. “What we are seeing is evidence of the increase in capacity in the copper business in the last decade,” he says. “Mining companies have been investing in new capacity in response to the increase in metals prices we saw a decade ago.”

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