Metal market: gold and copper prices drop, U.S. Federal Reserve’s protocols are in limelight

20.05.2013 16:20
Metal market: gold and copper prices drop, U.S. Federal Reserve’s protocols are in limelight

YEREVAN, May 20./ARKA/. The gold quotes were pressured last week as the investors were more risky amid a record high jump of the American stock indices. The pressure was also instigated by low physical demand from the world major consumers. In addition, the Central Bank of India banned importing gold while deferring its payment.

Meanwhile, gold didn’t get any support even after the World Gold Council released its report stating the global gold demand fell by 13.05% in the first quarter of 2013 to 963.0 tons. As a result, the gold quotes reached a new four-week record low of 1,355.09 USD per troy ounce. Moreover, the pressure came from the strong USD against its main competitor currencies. Thus, the gold price dropped by 5.48% to 1,358.74 USD per troy ounce last week.

This week, the gold quotes will go on being pressured as the situation is still misty  due to better global macroeconomic statistics and investors’ inclination to take risks. However, we don’t deny the possible consolidation of the quotes amid some quite trades ahead of publication of the protocols from the last meeting of the U.S. Federal Reserve, May 22, Wednesday. Besides, it is important to note that on Monday, the markets in Germany and France will be closed, on Banking day, therefore, the activity of investors can be limited.

This week, FOMC protocols will be in the limelight of the investors as they can hint on possibly earlier termination of quantitative stimulus program. If these forecasts come true, the gold quotes may sharply tumble breaking the supporting benchmark of April’s minimum. In that case, another supporting benchmark of 1,280.0 USD per troy ounce can be announced.

This week, the gold dynamics will mainly depend on the macroeconomic statistics from the U.S. and eurozone. Of the American news we should focus on the number of orders for durable goods, housing market for April, the number of primary  unemployment allowance applications for the last week. Of the European news we should highlight business environment index of Germany in May published by IFO, and the primary PMI for industrial sector of the leading states for April. Some moderately positive statistics from overseas, and favorable data from the eurozone will support the quotes. The resistance benchmark may be 1,421.70 USD per troy ounce over the next five days.
The copper prices decreased by 1.52% to 3.3125 USD per pound last week. The highest downturn of prices was reported early last week at 3.2215 USD per pound, a record low over the two weeks. It was caused by the weaker than expected U.S., European and Chinese macroeconomic statistics as well as sharp tumbles of the prices for commodities. The strong USD also contributed to the decrease.

However, at the end of the week, the copper quotes managed to recover amid the purchases at low prices. Another driver here was a drop of this asset at Shanghai Futures Exchange. Reserves of this asset at Shanghai Futures Exchange downed by 4713 thousand tons to 190330 thousand tons last week.

The increased reserve of this asset at the London Metal Exchange also stimulated dwindle of the asset.

Copper quotes may rise if the Asian consumers show higher demand. In addition, the U.S. Federal Reserve’s protocols can really affect the quotes as well. Besides, the copper dynamics will depend on macroeconomic statistics from the USA and eurozone. This statistics may be moderately positive. If these forecasts come true, and the U.S. housing market and business activity index in the eurozone are favorable, the prices for non-ferrous metals, including the copper, will grow.

However, if the statistics is not justified, and the American currency go on rising, the copper can drop in cost. Low data from China, including industrial activity index by HSBC, can also prevent the copper price hike. The prices may vary within 3.19 – 3.39 USD per pound.

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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