Gold prices rose driven higher mainly by a wilting U.S. dollar, political tensions and receding concerns over the impact of U.S. interest rate hikes fed into its rally – 01 Jan 2018


Gold prices rose driven higher mainly by a wilting U.S. dollar, political tensions and receding concerns over the impact of U.S. interest rate hikes fed into its rally – Gold on MCX settled up 0.5% at 29156 driven higher mainly by a wilting U.S. dollar, political tensions and receding concerns over the impact of U.S. interest rate hikes fed into its rally. Gold’s gains coincide with the greenback, in which gold is priced, sliding toward its worst year since 2003, damaged by tensions over North Korea, the Russian scandal surrounding U.S. President Donald Trump’s election campaign, and persistently low U.S. inflation. Gold as a safe-haven asset has been supported as the United States, China and other world powers have worked to contain North Korea’s nuclear ambitions. Many investors had predicted the dollar would get a boost from U.S. tax cuts, tighter central bank monetary policy and strong growth rates in 2017. Dollar hit its strongest in 14 years at the start of 2017 on hopes that newly elected U.S. President Donald Trump would implement progrowth, pro-inflation measures. However, the currency has weakened on doubts Trump would succeed in implementing some of the programmes he had highlighted in his campaign. A rally in gold prices to the highest level in a month and the year-end holiday mood dampened demand across Asia. 

Crude oil prices gained as prices closed above $60 on the final trading day of the year spurred by strong demand and declining global inventories – Crude oil on MCX settled up 0.79% at 3850 as prices closed above $60 on the final trading day of the year spurred by strong demand and declining global inventories. Prices seen supported by ongoing supply cuts by top producers OPEC and Russia as well as strong demand from China. The spread between the benchmarks widened throughout the year, as Brent responded to the drawdown in supply from major world producers while U.S. output continued to grow. Earlier this year, oil prices slumped on concerns that rising crude production from Nigeria, Libya and elsewhere would undermine output cuts led by the Organization of the Petroleum Exporting Countries and Russia. Prices were further boosted by a fall in U.S. commercial crude storage levels, which dropped by 4.6 million barrels to 431.9 million barrels. Inventories are now down by almost 20 percent from their historic highs last March, and well below this time last year or in 2015. U.S. output is still up by almost 16 percent since mid-2016, but most had expected production to break through 10 million bpd by the end of this year. The U.S. oil rig count rose by about 42 percent by end-2017 compared to the corresponding period last year, as energy companies boosted spending amid a recovery in crude prices. 

Copper prices dropped as traders and funds taking profits and squaring books ahead of the year-end after prices seen supported on strong demand in China - Copper on MCX settled down -0.63% at 466 as traders and funds taking profits and squaring books ahead of the year-end after prices seen supported on strong demand in top consumer China and supply disruptions. Copper prices were supported by news that Jiangxi Copper had been ordered to halt production for at least a week. Sentiment is very bullish as china's copper imports reportedly rocketed up to 329,168 tonnes in November, up 19 percent year-on-year. A major trigger for copper came after China proposed a ban imports of scrap metal from the end of next year, fuelling expectations it would import more refined metal and products. China’s central bank said it will gradually raise the reserve funds ratio of third-party payment firms to 50 percent by April 2018 from a current rate of 20 percent, as it continues to ramp up regulation of the industry. The bank will increase the rate by 10 percentage points a month from February to April, it said in a statement released. The central bank said earlier this year that it will eventually ban non-bank payment firms from making any private investments with money deposited by users, which would see the reserve rate at some point increased to 100 percent. China’s war on polluting industries, its supply reforms and robust demand growth have combined to create a bonanza for copper and aluminium which are heading for their biggest rises since 2009. 

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