Gold & Copper Traders Move In Opposite Directions

Gold added $3.60 in the Asian session as traders bought up the low priced metal as speculators play the buy on dips sell on tops to book bits of profits. Market activity is expected to begin to decline early Wednesday as US traders leave on the long Thanksgiving holiday. Most speculators will begin to close positions and park their funds for safety over the holiday as international markets remain open. The US dollar edged down a bit as traders booked profits after the greenback broke the 100 level on Monday. The greenback is holding at 99.76. Silver added 33 points but remains weak after falling into the $13 level yesterday the white metal is trading at 14.065. Platinum dipped $3.80 to 842.15. Gold and silver languished near their lowest level in six years on Tuesday, while platinum dipped to a seven-year low on a strong dollar and growing expectations that the Federal Reserve would increase US interest rates next month.

Outflows from exchange-traded funds backed by the metals, all non-interest-paying assets, as investors position for a rate hike are also hurting prices. The dollar had hit an eight-month high on Monday on hopes of a rate hike. A firm greenback makes dollar-denominated commodities more expensive for holders of other currencies.

San Francisco Fed President John Williams had on Saturday cited a “strong case’’ for raising rates when Fed policymakers meet next month, as long as US economic data does not disappoint, echoing other officials. Non-farm payrolls data earlier this month also supported views of a strong economy.

Sustained strong physical demand in top consuming region Asia tends to provide a floor to falling prices. Premiums on the Shanghai Gold Exchange, a proxy for physical demand in China, were at $5 an ounce on Tuesday, versus $3-$4 in the beginning of the month. Assets in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund (ETF), tumbled to 655.69 tonnes on Monday, the lowest since September 2008.

Holdings of platinum ETFs are at a two-year low, while assets in palladium funds are close to their lowest since April 2014.

In other metals, copper recovered 7 points to 2.023 after falling to its lowest point in 2015 and could break below the $2 price on the surging US dollar.  Monday was an ugly day on industrial commodity markets in Asia today with some big falls in crude oil, copper, zinc, and Chinese rebar steel. Overall, copper prices are likely to remain in downward spiral for the coming months as weakness in Chinese economy vis-à-vis rising prospects of U.S. rate hike will continue to bother the already beaten up metals space. China copper demand growth has peaked and rates of expansion will probably slow to about 2% annually in the next few years. Goldman Sachs Group in September forecast that copper demand in China will rise by 3% a year through 2020, slowing from gains of about 6% last year and 11% in 2013.