Gold Rallies and US Dollar Declines Following Repeal and Replace Vote Failure. - 28 Mar 2017

Commodity Intraday Tips

Gold Rallies and US Dollar Declines Following Repeal and Replace Vote Failure.  
Trading to an intraday high of $1261, gold prices have managed to hold onto the vast majority of gains. As of 330 Eastern standard time gold is trading at $11.20 higher at 1254.10. This net gain is a combination of a weaker dollar along with safe haven buying. As indicated through the KGX, today’s $11 contains a $7.10 (57 %) gain due to a weak US dollar, and a $4.10 (33 %) gain attributable to buying. In an 11th hour move last Friday, President Trump asked House leaders to cancel the vote to repeal and replace Obamacare. Market participants had little to no time to respond to this news on Friday.   The failure of the current administration to pass the Republican AHCA health bill caused market participants to question whether President Trump will be effective in converting other campaign promises into active legislation. Whether it is tax reform, the initiation of large infrastructure projects, regulatory reform or trade agreement reform, the ability for President Trump to harness his negotiation skills and “art of the deal” is brought into question following Friday’s defeat.  

Barclays Hikes Price Forecast for Copper in 2017. 
Barclays Capital revised its forecast for copper prices for 2017, reported. It hiked forecast for copper price from $5,458 per ton to $5,616 per ton for 2017. Overseas Copper Smelting Projects Decrease. In recent years, copper refining projects overseas were mostly in 2016. Refining capacity expected to come online was 450,000 tons, but actually the capacity put into production was even lower. Growth of new smelting capacity slowed significantly to less than 60,000 tons in 2017. And there will be only 4 new projects in 2018, with small capacity, said Zhang. New projects are mainly smelting & refining projects. In a long-term point of view, Chile’s copper refining capacity will be large, and 200,000 tons of capacities will be added in 2024. But, this project is of great uncertainty since the country’s copper industry aims to axe capital spending, he added. 

Weaker dollar lifts oil futures, but soaring US output weighs. 
Oil prices edged up on Tuesday on a weaker dollar, but crude continued to be weighed down by surging U.S. production and uncertainty over whether an OPEC-led supply cut is big enough to rebalance the market. The greenback has lost 2.9 percent in value against a basket of other leading currencies since its March peak on doubts over U.S. President Donald Trump's policy making abilities. The dollar weakens, many futures traders pull out money from foreign exchange markets and put it into commodities futures like gold or crude futures instead. While there was some support for crude from financial markets, physical fundamentals remained weak, especially due to soaring U.S. output that is undermining efforts lead by Organization of the Petroleum Exporting Countries (OPEC) to cut production in order to rein in a global fuel supply overhang and prop up prices. Soaring output and brimming inventories have made U.S. WTI crude much cheaper than its international peer, Brent, which is receiving support above $50 per barrel by the OPEC-led production cut. As a result, record amounts of U.S. crude oil have found their way to Asia and other destinations this year, and more is expected to be shipped out as traders take advantage of arbitrage opportunities by sending out excess U.S. crude into regions where it can find buyers. 

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