Metals markets were disappointed by China’s top economist on Tuesday, as he failed to provide any further specific stimulus measures.
Analysts say that gold and copper prices fell on Tuesday. The recent price rise for both metals could fizzle out within the next few weeks.
In a recent note, Ewa Mnthey and Warren Patterson from ING Group stated that “Industrial Metals fell this morning as disappointment about China triggered a move away from risk.”
Beijing’s economic recovery continues to be a source of concern. The demand for commodities like crude oil, base metals, and gold has been poor. This is affecting investors around the globe.
China is the largest consumer of gold and base metals in the world.
Reduced bets against US rate hikes weigh down gold
The gold price has fallen by about 5% since the last week, as the positive US economic news has dampened expectations of interest rate cuts at the Federal Reserve’s upcoming meetings.
The US labor market report showed a much stronger-than-expected increase in jobs created in September. The unemployment rate fell in the US and the average earnings per hour also increased.
Market participants expect that interest rates will be reduced by 25 basis points only in November and December, according to Fed Fund Futures.
Carsten Fritsch is a commodity analyst with Commerzbank AG.
The Fed and our economists expect this to be 25 basis points lower than what was previously forecast by the end the year.
Gold prices fall due to safe-haven demand limitations
Fritsch stated that the continued conflict in the Middle East is driving safe-haven gold demand.
Fritsch stated that “gold is being pulled by opposite factors in opposing directions.”
China’s central banks reported the same gold reserves at 72.8 million ounces as of September 30. The bank had not bought gold in five consecutive months.
In its Tuesday morning briefing, China’s National Development and Reform Commission didn’t announce any further specific measures.
Beijing is confident of reaching economic goals this year, and has promised to support the growth further. However, it did not take any major steps.
Fxstreet.com says that gold’s technical support is at $2,600 per ounce. It said that if prices drop below this level, the next support will be around $2,560.
This correction could continue to the next support area, which is around $2,535-2.530, on the way up to the psychological $2,500 mark.
Gold contract most active on COMEX at $ 2,665.60 an ounce was largely unchanged from previous close.
On Tuesday, the price of the yellow metal fell to a new low. It was $2647.55 an ounce. The recent rise in prices for the metal had paused.
The copper price rise is over.
Before Tuesday, the base metals market enjoyed a short rally.
Expectations of more stimulus from China drove the rally.
Copper prices fell dramatically as China’s chief economic planner made no new promises.
Last week copper was above $10,000 a ton, but on Tuesday it fell to $9700.
Commerzbank’s Fritsch said:
It was a shocking shock and shows how fragile the atmosphere is following the recent rally. The Ministry of Finance is now providing more details to analysts. Metal prices will likely fall the longer analysts wait.
Beijing introduced several stimulus measures last month, such as interest rate reductions and support targeted for the real estate sector. These actions had helped to boost copper prices.
The three-month contract for copper on the London Metal Exchange is currently $9,792 per tonne, down by 1.4% compared to the previous closing price.
The rally for gold and copper is losing momentum, according to this post. This post may be updated as new information unfolds
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