Commodities: Greenback continues to climb, gold on the backfoot

Digital Look WebFG News | 18 Oct, 2017 19:59 - Updated: 19:59 | | |

Money cash dollars

The US dollar extended a winning streak on Wednesday as the focus on upcoming changes to monetary policies in the US grew.

Talk over the next Federal Reserve Chairman lifted the dollar for a fifth straight day, supported by higher U.S. Treasury yields, as the dollar index climbed 0.1% to 93.578.

"The overnight news of progress in negotiations over the new U.S. tax plan seems to be dollar-positive but we have to see some strong economic data before the dollar breaks higher," said Jane Foley, senior FX strategist at Rabobank.

A strengthening dollar along with a simmering down of North Korean/US geopolitical tension pressured gold prices for a third day this week.

Spot gold was down 0.4% to $1,280/Oz, continuing to move lower since the start of the week were it was trading at a high ogf $1,306/Oz.

Futures saw the December gold contract move 0.32% lower to $1,282/Oz.

"With dollar strength in mind, it would present further risks to gold, but I'm waiting to see how the Catalonia crisis unfolds tomorrow, pinpointing a possible next move for gold, in either direction," said Jameel Ahmad at FXTM.

In other precious metals, silver fell 0.41% to $16.98/Oz, platinum fell 1.2% at $924/Oz while palladium also fell, down 0.32% to $981/Oz..

Base metals saw copper slip for a third day this week, down 0.39% to $7,016/tonne as profit taking continued following a rescent rally to three year highs.

Market participants are awaiting for announcements from China's Communist Party Congress to boost manufacturing and construction activity and fuel demand for industrial metals.

"People are expecting major social building initiatives and all sorts of explosive announcements," said Marex Spectron's global head of analytics, Guy Wolf.

Oil prices had much to contend with on Wednesday, including Iraq/Kurdish risk premiums, Falling US inventories as well as a possible OPEC-led nine month extension to supply cuts.

Prices were fairly flat, with West Texas Intermediate (WTI) for January delivery falling 0.08% to $52.24/barrel while benchmark brent crude was up 0.05% to $57.59/barrel.

Crude oil inventory figures released by the Energy Information Administration (EIA) showed a reduction of 5.7 million barrels. Crude stocks at the Cushing, Oklahoma, delivery hub rose by 202,000 barrels, the EIA said.

Regarding the proposed extension of the oil supply cut, one OPEC source said, "If demand growth is performing very well, then the decision might be postponed till early next year," adding, "But there is still a big chance for it to be taken in November."

Talking about the ongoing tensions surrounding the Kurdish independence referendum, Commerzbank said in a note, "It remains to be seen whether the Kurds, after withdrawing from the region they claim to be entitled to, will allow crude oil to be transported by pipeline across their territory to the Turkish Mediterranean port of Ceyhan."

Iraq's oil minister said it had asked oil major BP to develop the Kirkuk oilfields, but the company said it was in no rush to return to the area until security improves.

The grains market saw soybean futures for November trade fairly flat, up 0.04% to $9.89/bushel, as improving weather for the U.S. harvest and Brazil's planting season kept the focus on ample supplies of the oilseed.

"The soybean market confirmed its incapacity to stay above $10/bushel. The return of dry weather in the U.S. will allow farmers to speed up harvest works," consultancy Agritel said in a note.

December corn fell 0.6% to $3.48/bushel, capped by expectations that drier weather would let harvesting in the Midwest pick up after a rain-hit start, while New York cotton for December was down 0.28% to $0.6773/lb.

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