Metal market: Bernanke’s comments result in gold and copper quotes upturn

02.04.2012 15:25
Metal market: Bernanke’s comments result in gold and copper quotes upturn

YEREVAN, April 2. /ARKA/. Gold trading was carried out quite actively last trading week, however it is already the second week that didn’t report any price tendency. As a result gold prices slightly increased by 0.38 % to 1,668.01 USD dollars per troy ounce.

At the beginning of the trading week the gold prices rose to a week minimum of 1,696.77 USD dollars per troy ounce due to Ben Bernanke’s speech at the U.S. Federal Reserve’s conference. The regulator head’s circumspect tone, expressed towards stability of the recent tendencies in the labor market as well as the regulator’s readiness to go on with using all the available tools to support economy, was regarded by the market participant-members as a possibility to continue leading soft monetary and credit policy of U.S. Federal Reserve, thus encouraging the purchase of precious assets.

However, within Tuesday-Thursday gold prices were declining against the background of total tumble in prices at the markets after the USA issued weak economic data, weak physical demand and strong U.S. dollar. The ongoing strike in India organized by the retailers against tax increase on gold import has made the largest gold importer to do away with the purchases.

Nevertheless, on March 30, Friday, gold quotes partially recovered the losses due to both, Finance ministers’ decision to boost anti-crisis funds up to 700 billion euros, and U.S. dollar weakening. Moreover, the investors were equalizing their positions on the last trading day prior to the end of the month and the quarter.

A slight rise or consolidation in gold prices can be expected next week, however steadily rising dynamics requires resumption of a stable investment and physical demand. The main risks arising around the physical demand downfall come from the ongoing protests by the precious metals retailers in India. Apparently, the physical demand for this asset will improve its positions after the sellers stop their demonstrations. At the same time strong U.S. dollar will continue halting rise in gold prices.

The expected macroeconomic statistics from the USA and Eurozone can also have an impact on the precious metal’s dynamics. The main points of the American statistics are data on the purchasing managers' index (PMI) in manufacturing sector, the number of new jobs from ADP agency, change in the number of the employed in non- agricultural sector in March as well as publication of U.S. Federal Reserve last session protocol from March 13. The expected moderately positive statistics from overseas may support the precious metal’s quotes. Resistance level for gold can be 1,715.0 USD dollars per troy ounce next week.

Nevertheless, very optimistic data from the USA may provoke new concerns around early tightening of monetary and credit policy by the U.S. Federal Reserve, and strengthen U.S. dollar positions, thus resulting in gold prices tumble. Point of 1,625.0 USD dollars per troy ounce will be supporting for gold for the next five trading days.

Amid European news we should highlight the PMI final data publication, and ECB regular meeting on interest rate and a traditional press conference by its chairman, Mario Draghi. According to our assessments, the European regulator will not surprise anyone in changing monetary policy conditions, what may have a positive influence on the gold quotes. We suppose that the Governing council of the regulator, will probably take a wait for evaluating the effect from undertaken measures on providing liquidity.

Copper prices at the futures markets advanced 0.43 % to 3,8235 USD dollars per copper pound last week. The copper quotes got the basic positive impulse on Monday, March 26, after U.S. Federal Reserve chairman Ben Bernanke expressed uncertainty regarding labor market resumption perspectives and said the ongoing extra-soft monetary and credit policy should remain unchanged as for now. A slight increase in stock reserve of this asset in London Metal Exchange (LME) last week halted the copper prices rise.

Next week copper dynamics will mainly depend on U.S. and China’s macroeconomic statistics as well as U.S. dollar’s dynamics. This statistics is expected to be moderately positive. If these forecasts are justified and PMI indexes for manufacturing sector of USA and China, and the figures coming from the U.S. labor market are moderately positive, prices of non-ferrous metals, including copper, may continue rising. In the sideway trends go up, we can face another rally at the copper market.

However, if this statistics doesn’t justify the hopes, and American dollar starts growing again, the copper prices may tumble. Anticipated fluctuation range of copper quotes on the futures market is 3.75 – 3.94 USD dollars per copper pound coming week

Mikael Verdyan, an analyst at FOREX CLUB, specially for ARKA news agency.

The opinion of the author does not necessarily reflect that of the agency. -0-


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