Commodities: Gold receives a leg up as US tax reforms face possible delays

Digital Look WebFG News | 08 Nov, 2017 18:35 - Updated: 18:35 | | |

Gold bars

Gold touched it's highest level on over 2 weeks on Wednesday while the greenback softened on possible delays to long-awaited US tax reforms.

The US dollar weakened against a basket of currencies, down 0.07% to 94.844 while spot gold traded 0.81% to $1,285/oz., breaking resistance in the $1,283 area.

US gold futures saw the December contract trade 0.83% firmer to $1,286/oz..

"The December rate hike is baked in but the market is looking more forward on interest rates into 2018. If the tax cuts are delayed then the U.S. Federal Reserve can be a bit more relaxed," said Robin Bhar at Societe Generale.

Looking ahead to the future of gold, Bernard Dahdah at Natixis said, "The closer we get to the interest rate hike in December the lower the price of gold should get."

Analysts have warned that gold imports from India could be down as much as 25% from a year ago in the last quarter of 2017 due to weak demand during key festivals and as investors seek better returns from riskier assets such as equities.

In other precious metals, silver was up 1.5% to $17.20/oz., platinum traded 1.53% firmer to $937/oz., while palladium was 1.38% higher at $1,019/oz., hitting it's highest level since 2001.

The metal, mostly used for auto catalysts to clean pollution from exhaust fumes, has rallied on an expected supply deficit and higher demand in the car market.

"Palladium's got very good fundamentals and platinum not so good and that is keeping the discount between the two as wide as we have ever seen," Bhar said.

Wednesday saw virtual currency Bitcoin continue to strengthen, up 9.56% to $7,767 as venture capital firm Blockchain Capital released the results of a survey which found that awareness, sentiment and conviction in Bitcoin was most prevalent in younger demographics.

According to the report, when given a choice between $1,000 worth of Bitcoin and $1,000 worth of a traditional financial asset, 27 percent of millennials chose Bitcoin over an equivalent amount of stocks, 30 percent chose Bitcoin over government bonds, 22 percent chose Bitcoin over real estate, and 19 percent chose Bitcoin over gold.

Base metals saw copper recover from recent profit taking to trade 0.41% firmer to $6,855/tonne on Wednesday, despite data from China that showed weakness in top metals consumer China.

A Reuters poll showed that China's environmental crackdown will force the shutdown of polluting smelters over the winter and will push the global market into a deficit, but that the impact is already in the price.

"With inventories in China still rising and the futures curve in contango, there does not seem to be a shortage of metal," said analyst Carsten Menke at Julius Baer in Zurich. "We believe the market has gotten ahead of itself in pricing in winter season production cuts."

Oil prices received a boost higher on Wednesday, despite US crude inventories increasing 2.2 million barrels, beating expectations of a decrease of -2.5 million barrels.

US West Texas Intermediate (WTI) for January delivery was up 0.3% to $57.65/barrel, managing to hit a day high of $58.14, while benchmark brent crude was 0.5% firmer at $64.06/barrel.

The rise in US stocks was offset by rising political tensions in the Middle East between Saudi Arabia and Iran.

Tensions are high in the region following a sweeping anti-corruption purge in top crude exporter Saudi Arabia who have also confronted Iran over the conflict in Yemen.

Analysts at Citi said in a note out earlier in the day that "Stronger oil fundamentals and investor inflows have been the catalyst for higher oil prices, but adding further support now is a focus on several geopolitical risks that have been looming over oil markets for a while."

Soybean futures traded relatively flat on the day, only managing a 0.11% push higher to $10.08/bushel, while corn was 0.32% firmer at $3.49/bushel as investors squared positions ahead of the US Agriculture Department's monthly crop supply and demand reports on Thursday, which is expected to show higher corn yields, lower soybean yields and still ample global supplies of grains and oilseeds.

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