Gold and Copper Slip, Still Affected by China’s Turmoil

Gold prices plunged on Friday, dragging away from a two month peak as the United States dollar regained some ground followed by People’s Bank of China setting higher Yuan guidance rate for the first time in nine days.

For February delivery, gold futures on the COMEX division of the New York Mercantile Exchange slumped 0.71 percent at $1,099.90. The February contract ended Thursday’s session 1.46 percent higher and traded at $1,049.60 per ounce.

The precious metal’s futures sought support at $1,081.60 which is the low of January 6, and resistance at $1,107.80 which is the high of November 4.

Meanwhile, the dollar sought support after the People’s Bank of China strengthened the Yuan’s midpoint rate for the first time in nine days on Friday, setting it at 6.5636 per dollar against the previous fix of 6.5646.

However, China was forecasted to continue allowing the Yuan to weaken in the longer term in a bid to support its exporters and remain competitive against its regional rivals.

Moreover, China reported on Thursday that it suspended its new stock market circuit breaker introduced only on Monday as the system failed to cut market volatility.

Gold had boosted broadly after Wednesday’s biggest daily decline in the Yuan midpoint rate since last August, when an unexpected almost 2 percent devaluation of the currency sparked a broad based sell off in markets.

On the other hand, market players were now focusing the publish of main United States employment data which will be released later in the day for further hints on the strength of the country’s job market.

A day earlier, the United States Department of Labor reported the number of individuals filing for initial jobless benefits in the week ending January 1 plummeted by 10,000 to 277,000 from the previous week total of 287,000, which is the highest level since July.

Analysts forecasted jobless claims to slip by 12,000 to 275,000 last week.

Copper Gains by 0.5% on Spot Demand

The red metal futures surged on Friday, gaining $4.53 or 0.47 percent as markets elevated bets amid climbing spot demand.

However, weakness in the base metals pack at the London Metal Exchange, as three month copper contract tumbled 0.2 percent at $4,517 per metric ton, just $13 lower that its closing price on Thursday at $4,523 per ton.

The decline was prompted by a week of turmoil in China’s Yuan and stock markets which affected commodities and hit global mining stocks, causing gains to limit.

As reported by analysts, “We still expect copper prices to recover toward $6,000 per ton as we see a supply shortage going forward, but it may take longer than anticipated to see a recovery. We may have to wait until the prices of oil and steel bounce back.”

London copper dropped on Friday to near the lowest level since 2009 after Chinese equities sank, sparking concerns about China’s ability to recover its sluggish economy and casting a pall over the demand outlook for the world’s biggest consumer of metals.

The halt by Chinese securities regulators on Thursday of a new market circuit breaker mechanism, which had compounded stock losses instead of stabilizing them, helped arrest the price decline in global markets, including copper.

However, after the initial rises, copper dips once again during early trade.

As stated by an analyst, “The fact that Chinese stock markets are rising somewhat again, thanks primarily to state intervention, and the firmer Yuan are ensuring that metals” are doing better on Friday.”

Copper has plunged 2 percent in the first five trading sessions of the year. With sentiment around China still weak, many analysts do not see relief for the industrial metal in the short term.

The red metal is also struggling against the continuous strength of the dollar, which makes dollar denominated commodities more expensive for market players who hold other currencies.

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