Metals Moderate In The Morning

Gold gained $1.50 in the Asian session as buyers took advantage of lower prices and the dip in the US dollar. Gold hit a four-week low on Monday, extending a sell-off into a fourth straight session as investors fretted that the Federal Reserve would raise U.S. interest rates this year. The metal failed to benefit from a fall in the dollar after downbeat Chinese factory surveys lent support to safe-haven currencies such as the yen. U.S. and European stocks rose.

Gold had rallied last month on speculation that the softness in the global economy could prompt the Fed to delay raising rates until next year. But the U.S. central bank’s hawkish tone last week triggered a fresh sell-off in bullion.

Higher interest rates would weigh on gold because they lift the opportunity cost of holding the non-yielding asset. Asian gold demand saw some improvement toward the end of last week as lower prices attracted buyers. But local premiums remained largely unmoved, a sign that demand has not picked up in a significant way, dealers said.

Data on Friday showed that speculators trimmed a bullish bet in gold from an 8-1/2-month high in the week ended Oct. 27. The Fed kept interest rates unchanged on Wednesday, as expected, but in a direct reference to its next policy meeting, the central bank put a December rate increase firmly in play. The U.S. central bank said that raising rates at its next meeting would depend on progress on employment and inflation, omitting any reference to global developments affecting economic activity. Last week, holdings in the SPDR Gold Trust declined by 3.28 tonnes to 692.26 tonnes. On a year-to-date basis, holdings have declined by 16.76 tonnes, or around 2.1 percent.

Surging demand for coins and bars and a rise in buying by central banks pushed physical gold demand up 7 percent in the third quarter, though the market remained in a surplus of 51 tonnes, GFMS analysts at Thomson Reuters said in a report. On the contrary, data last week showed that new U.S. single-family home sales fell to near a one-year low in September, pressuring the U.S. dollar versus a basket of major currencies. Silver gained 27 points to 15.435 as traders bought up the cheap metal. The dual role of silver helped gains after Eurozone, UK and US manufacturing data was better than expected. Platinum added $4.90 to 983.55.

Copper gained 11 points in the morning session to trade at 2.324. Last week  copper prices plunged by 2 percent as data showed that US economic growth slowed sharply in the third quarter as businesses cut back on restocking, thereby igniting concerns of bleak demand from the US. Moreover, increased prospects of a U.S rate hike in December boosted the dollar and hurt dollar denominated commodities.

However, sharp losses were cushioned as China in an effort to buoy demand, cut borrowing costs on some assets used to add funds to the banking system for the first time since August. Further, rising prospects of expanded monetary easing in Europe as indicated by ECB last week acted as a positive factor.