Gold prices retreat ahead of Fed chair Yellen’s speech

Mar 3, 2017 - 9:31 AM GMT
by

FastMarkets

Precious metals are generally weaker this morning, Friday March 3, with gold and silver prices off 0.3%, with spot gold prices at $1,231.40 per oz, platinum prices are off 0.1%, but palladium prices are up 0.4%. Thursday was also a day of weakness with prices off an average of 1.8%, led by a 3.1% sell-off in silver prices.

The base metals prices are steadying themselves this morning, with gains seen across the board averaging 0.4%, spread between 0.1% gains in lead and tin prices and 0.9% in nickel to $10,910 per tonne. Three-month copper prices are up 0.2% at $5,937 per tonne.

These gains come after a day of weakness on Thursday when prices fell an average of 1.8%, led by a 2.7% fall in zinc prices.

In Shanghai, the base metals on the Shanghai Futures Exchange are down by an average of 1.1%, led by a 2% fall in zinc prices, while copper prices are off 0.9% at 48,250 yuan per tonne. Spot copper prices in Changjiang are off 1.4% at 47,630-47,770 yuan per tonne and the LME/Shanghai copper arb ratio has moved out to 8.12, which means the arb window remains closed.

In other metals in China, May iron ore prices on the Dalian Commodity Exchange are off 1.5%, on SHFE steel rebar prices are down 0.4%, with silver prices off 2.9% and gold prices are down 0.7%. In international markets spot Brent crude prices are up 0.4% at $55.24 per barrel, while yields on the US ten-year treasuries are 2.4743%.

The equities’ rallies ran out of steam on Thursday with the Euro Stoxx 50 closing down 0.2%, the Dow closed off 0.5% and Asian markets are weaker this morning as the market adjusts itself ahead of US Fed Chair Janet Yellen’s speech this evening. The Nikkei is off 0.5%, the Hang Seng is off 0.6%, the Kospi is down 1.1%, the CSI 300 is off 0.2%, the ASX 200 is off 0.8%. Basis Fed fund futures, the market is putting a 77.5% chance of a 0.25 basis point rise in US interest rates at the March Federal Open Market Committee (FOMC) meeting – we are surprised sentiment has become so hawkish in such a short term.

In FX, the dollar index is consolidating recent gains with the index recently trading at 102.01, having been as high as 102.27 on Thursday. The euro is weak at 1.0525, as are the sterling at 1.2259, the yen at 114.17 and the Australian dollar at 0.7562. The yuan is weakening again, it was recently quoted at 6.8927 and the emerging market currencies we follow are showing some weakness too.

The economic agenda is busy with services PMI data out in China, across Europe and the USA. In addition, there is data on Japanese consumer confidence, German and EU retail sales. This afternoon the focus will be on Yellen’s speech at 18:00 GMT, but ahead of that FOMC members Charles Evans and Jerome Powell are speaking and FOMC member Stanley Fischer is speaking at the same time as Yellen.

Consolidation continues in the base metals as overhead selling needs to be absorbed, but the dips also seem to be attracting sufficient buying to underpin prices. On balance, we think the underlying trends remain bullish so we would look for sideways-to-higher trading. However, should broader markets suffer a sell-off then risk off could hit all the markets for a while.

Gold prices slipped further on Thursday and there is follow-through weakness this morning. We see the weakness as being driven by profit-taking as the market anticipates a US rates rise at the March FOMC meeting. General strength in other markets and the strong dollar have also been persistent headwinds for gold prices. The market has generally held up well, but markets rarely move in straight lines, so we see this pullback as a normal function of a trending market.

Metal Bulletin publishes live futures reports throughout the day, covering major metals exchanges news and prices.

 

Overnight Performance
GMT 07:02 +/- +/- % Lots
Cu 5937 9.5 0.2% 3333
Al 1919 8.5 0.4% 1661
Ni 10910 100 0.9% 951
Zn 2802.5 15.5 0.6% 2675
Pb 2262 3 0.1% 194
Sn 19350 25 0.1% 16
Average 0.4%        8,830
Gold 1231.4 -3.8 -0.3%  
Silver 17.756 -0.054 -0.3%
Platinum 988.1 -0.9 -0.1%
Palladium 769 3 0.4%
Average PM -0.1%

 

 

SHFE Prices 07:03 GMT RMB Change % Change
Cu 48250 -460 -0.9%
AL 14105 -90 -0.6%
Zn 22845 -470 -2.0%
Pb 18610 -220 -1.2%
Ni 90690 -670 -0.7%
Sn 146070 -1370 -0.9%
Average change (base metals) -1.1%
Rebar 3542 -16 -0.4%
Iron ore 688 -10.5 -1.5%
Au 277.35 -1.9 -0.7%
Ag 4165 -125 -2.9%

 

 

Economic Agenda
GMT Country Data Actual Expected Previous
1:45am China Caixin Services PMI 52.6 53.3 53.1
5:00am Japan Consumer Confidence 43.1 43.7 43.2
7:00am Germany German Retail Sales m/m -0.8% 0.2% -0.9%
 8:15am Spain Services PMI 55.1 54.2
8:45am Italy Services PMI 53.1 52.4
8:50am France Final Services PMI 56.7 56.7
8:55am Germany Final Services PMI 54.4 54.4
9:00am EU Final Services PMI 55.6 55.6
9:30am UK Services PMI 54.2 54.5
10:00am EU Retail Sales m/m 0.3% -0.3%
2:45pm US Final Services PMI 53.9 53.9
3:00pm US ISM Non-Manufacturing PMI 56.5 56.5
3:15pm US FOMC Member Evans Speaks
5:15pm US FOMC Member Powell Speaks
6:00pm US Fed Chair Yellen Speaks
6:00pm US FOMC Member Fischer Speaks