Smart Investors Begin To Buy Up Cheap Base Metals

Gold continues to gain, even though the longer term outlook remains bearish, the market uncertainty caused by the moves by Chinese currency agencies to allow a wider float of the yuan. Gold added $2.10 to trade at 1109.80 while silver dipped 129 points after soaring on Tuesday. Silver is holding at 15.155 and platinum has dipped $4.25 to 983.75.

Oil and copper prices slumped to six-year lows and other commodities tumbled on Tuesday after China devalued the yuan, raising concerns that a persistently weaker currency will choke demand in the world’s top consumer.

Adding to a weeks-long summer selloff that has rattled raw material investors and producers, major commodity markets fell 3 per cent or more after China’s central bank made what it called a “one-off depreciation” of nearly 2 per cent in the yuan after a run of poor economic data, which sent the currency to a three-year low.

The dollar gave up immediate gains made after the devaluation, which ordinarily would boost dollar-denominated assets, but such is the importance of China to commodities demand that investors overlooked any weakness in the US currency.

Gold has been under pressure this year from an impending hike in US interest rates and has struggled to hold above $US1100 since a July 20 rout that pushed it down to $US1077 on July 24, it’s cheapest since 2010. But the prospect of an all-out race to the bottom among exporting nations enticed some safe-haven buying.

“Gold is benefiting from fears that this is a new round of ‘currency war’,” Macquarie analyst Matthew Turner said.

In other metals industrial and base metals are hurting after the moves in China. Copper tumbled to 2.302 down 40 points this morning alone. The World Bureau of Metal Statistics (WBMS) indicated global copper market has recorded a surplus of 196,000 tonnes during January to May this year and the worldwide copper market had reported a surplus of 282,000 tonnes for the entire year 2014.

The global mine production during the period from January to May this year totaled 7.82 million tonnes. The mine production has grown by 3.5% when matched with the corresponding five-month period in 2014. Besides, global refined copper output jumped higher by 3.2% over the previous year to 9.31 million tonnes. Chinese refined copper output reported significant increase of 189,000 tonnes during this period. EU-28 region’s production grew by 1.7% during January to May 2015.

The global copper demand during Jan-May ’15 stood at 9.113 million tonnes, down marginally by nearly 1.76% when compared with 9.276 million tonnes during the same period in 2014. The Chinese apparent consumption recorded sharp fall of 13,000 tonnes during this period to total 4.438 million tonnes. The Chinese demand accounted for nearly 48.7% of the global demand. However, EU-28 apparent consumption increased slightly by 1.1% from 2014 levels to 1.391 million tonnes.