Gold Soars While Base Metals Show Little Strength

Gold continued to rally in the Asian session adding 9.60 to trade at 1137.50 after the release of FOMC minutes on Wednesday afternoon. Silver took its cues from gold adding 171 points and bouncing back over the $15 level to trade at 15.35. Platinum broke the $1000 resistance level to trade at 1023.15.

Investors will have an opportunity to gauge the latest thinking of policymakers when San Francisco Fed President John Williams also delivers a speech in Indonesia later in the day. “Williams is a centrist and voter and as he is speaking in Asia, may address concerns around developments in China delaying Fed liftoff,” wrote Sean Callow, senior currency strategist at Westpac in Sydney. Economic conditions were “approaching that point” where policy tightening could be warranted, Fed officials said. Still, they were silent on whether they should act in September, or wait until they have more evidence that inflation is accelerating, the minutes showed. The chance of an increase next month is now at 36 percent, according to Fed fund futures, down from around 50 percent earlier this month.

Fears that Chinese growth, which carried the global economy following the international financial crisis of 2008, is slowing in the long term are affecting the outlook for many industries, with the commodities sector among the hardest-hit. Société Generale’s chief US economist said while Chinese-sparked volatility and recent domestic data made the US Federal Reserve’s timing harder to gauge, her team was still anticipating a September rate increase.

“China’s de-pegging the yuan has relatively small direct implications for US growth and inflation outlook but could delay the [rate] lift-off if it triggers broader weakness in emerging market currencies leading to capital outflows and tighter global financial conditions,” said.

Citi economists are also forecasting the first rate rise to occur in September, but with following rate raises occurring at a slower rate than in previous rate cycles because the global outlook was “highly delicate”.

Asian stocks fell and the dollar held declines against major peers as Federal Reserve timidity toward raising interest rates underscored global growth concerns. Gold rose as Turkey’s lira plunged and Kazakhstan allowed its currency to float.

Gold climbed 0.5 percent to $1,139.25, the highest in a month, as the selloff in raw materials and emerging-market assets boosted demand for haven assets. The precious metal jumped 1.5 percent in the spot market Wednesday. Gold futures climbed 0.9 percent.

Copper has been one of the worst hit metals trading well below its support levels. This morning copper added 3 points to 2.2770 regaining a few points on dollar weakness.  Copper futures fell below $5,000 a metric ton for the first time since the financial crisis, dropping under a key level in a market that has been hit hard by concerns over the Chinese economy and by uncertainty for a metal widely regarded as a barometer of global economic health. Copper’s decline comes as all metal prices continue their steep falls from the boom peaks of 2011. As with other base metals, copper has suffered from the oversupply that followed the boom and from concern over future demand from China, which consumes about 45% of the metal. While many analysts say faltering Chinese demand will continue to lead copper lower, others predict prices will rise by the fourth quarter because Chinese buying will pick up when global supply begins to fall.