Gold heads for weekly drop on talk of March rate rise - 6 Mar 2017

Commodity Intraday Tips

Gold heads for weekly drop on talk of March rate rise.  
Gold fell 1 percent on Friday and was on track for its biggest weekly loss in 2017 as speculation grew that the U.S. Federal Reserve would press ahead with a rate increase this month. Fed Chair Janet Yellen said on Friday that the central bank is set to raise its benchmark interest rate later this month as long as economic data on jobs and inflation holds up. To Yellen's comments, the probability of a Fed move in March had already risen to nearly 80 percent, money markets indicated, after hawkish comments from New York Fed chief William Dudley and San Francisco Fed President John Williams.  Gold prices have retreated more than 2 percent after failing to decisively break through resistance at their 200day moving on Monday. "The market has responded very clearly to the more aggressive stance by FOMC members regarding rate hikes in March," Mitsubishi analyst Jonathan Butler said. "It's fair to say that a rate hike in March is pretty much priced into gold." Gold is highly sensitive to rising U.S. interest rates as they increase the opportunity cost of holding non-yielding bullion, while boosting the dollar in which it is priced. 

SHFE Aluminum to Move Lower. 
Expectation over US’s rate hike weighs down LME aluminum but the contract finds strong support at the 20-day moving average. Attention should be on effect on SHFE 1704 aluminum and LME aluminum from China’s NPC&CPPCC on Monday during Asian trading hours. China didn’t indicate to cut capacity of aluminum cathode in NPC&CPPCC.  Although US Federal Reserve officials’ hawkish comment strengthened expectation of rate hike, US dollar index dropped technically. LME nickel will find support at the 10-day moving average on Monday and SHFE 1705 nickel will move at RMB 90,500-91,900/mt. Inventories of aluminum ingot in China’s five major trading markets climbed above 1 million mt as of March 2, Shanghai Metals Market data show. The inventories in the five markets, namely Shanghai, Wuxi, Hangzhou, Gongyi, and Nanhai, grew for 9 weeks in a row, and the level of inventories in those regions have been far higher than the level seen the same period of last year, according to SMM data.  In other news, Rio Tinto announced last Friday a 14 percent cut in aluminum production at Gladstone’s Boyne Smelters in Australia. The cut decision was due to a failure to agree a competitive power contract, the company said. 

Oil prices fall on doubts over Russian output curbs. 
Oil prices slipped in Asian trade on Monday, wiping out some of the gains of the previous session amid ongoing concern over Russia's compliance with a global deal to cut oil output. Figures released last week showed Russia's February oil output was unchanged from January at 11.11 million barrels per day (bpd), energy ministry data showed, casting doubt on Russia's moves to rein in output as part of a pact with oil producers last year.  Oil prices rose on Friday as the dollar weakened modestly after a speech by U.S. Federal Reserve Chair Janet Yellen, which suggested a rate increase would come at the end of its two-day meeting on March 15. While a rate hike would be supportive for the U.S. dollar, analysts said a near-term hike was already largely priced in. Crude oil prices were also supported by news of increasing supply disruptions in the Middle East, ANZ said in a note on Monday. That followed new doubts over Libya's attempts to revive its oil production after an armed faction entered two major oil ports on Friday, pushing back forces that captured and reopened the terminals in September.  

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