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Gold Extends Gains into Third Session, China Demand Aids

2 Jul

Gold inched up on Tuesday, stretching its gains into a third straight session as buyers in China continued to snap up deals after bullion’s plunge to a three-year low last week.

Prices were also helped by short covering that kicked in after gold logged its biggest ever three-month loss in the second quarter ended June on indications of an early wind down to the US Federal Reserve’s stimulus measures.

“We can see some stock loading in the market and physical buying in Shanghai,” said a trader in Hong Kong.

“However, fundamentals are still bearish and we will test the upside at USD 1,270.”

Spot gold rose 0.5 percent to USD 1,258.51 an ounce by 0318 GMT, while US gold rose about USD 2 to USD 1,257.9.

Shanghai futures rose for a second straight day after nine consecutive declines. They were trading at over USD 30 premiums to spot prices.

Bullion, typically seen as a hedge against inflation, has taken a beating since Fed Chairman Ben Bernanke said last month the economy was recovering strongly enough for the central bank to begin tapering its USD 85 billion monthly bond purchases in the next few months.

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Gold plunged 22 percent in the second quarter and is headed for a 25 percent drop this year, its biggest decline since 1981. It fell to USD 1,180.71 last week, its lowest since August 2010.

Spot gold is expected to end its current rebound at or below USD 1,273 per ounce, according to Reuters technical analyst Wang Tao.

Physical demand has not come to the rescue of gold as it did in April when prices fell the most in 30 years.

In Hong Kong, gold bar premiums over London prices remained at the same levels as last week, indicating that demand has not picked up strongly, dealers said.

Mixed US economic data on Monday added to uncertainty over the exact timing of the Fed’s tapering.

US manufacturing expanded last month, rebounding from an unexpected contraction in May, and construction spending neared a four-year high in May. However, hiring in the manufacturing sector was the weakest in nearly four years.

A more important jobs report, the US nonfarm payrolls, is expected to be released on Friday.

SPDR Gold Trust, the world’s largest gold exchange-traded fund, said its holdings fell 0.12 percent to 968.30 tonnes on Monday – its lowest since February 2009.

China Copper Prices May Witness New Lows in Q4 2013: Barclays

29 Jun

“Our economists have cautioned that implementation of the new government’s agenda of no stimulus, deleveraging and structural reform means there is an increasing downside that China could experience a temporary hard landing in the next three years,” the bank noted.

copper updatesLONDON : Copper prices in China may witness new lows in the fourth quarter of this year on rising copper mine supply, recent liquidity tightening and lower base metals consumption, stated London based Barclays in its recent market analysis.

“Our economists have cautioned that implementation of the new government’s agenda of no stimulus, deleveraging and structural reform means there is an increasing downside that China could experience a temporary hard landing in the next three years,” the bank noted.

In the first quarter of 2013, world copper consumption is estimated to have declined by around 5.3% compared with that in the same period of 2012, according to International Copper Study Group (ICSG). Chinese apparent demand declined by 10% owing to a 46% decline in net imports of refined copper.

Excluding China, year-on-year world copper usage declined by around 1.7%. On a regional basis, usage is estimated to have declined by 7.8% in Africa, 1.8% in the Americas, 7.6% in Asia, 0.2% in Europe, and 14.3% in Oceania.

World mine production is estimated to have increased by almost 11% in the first three months of 2013 year-on-year basis mainly owing to a recovery in production levels from constrained output in early 2012.

Meanwhile, according to ICSG projections for 2013, the global copper market is expected to have a production surplus relative to demand.

World production of refined copper is expected to exceed demand for refined copper by about 415,000 t, as demand will lag behind the growth in production. For 2014, although a recovery in usage is anticipated, a higher surplus is expected with increased output from new and existing mines.

Freeport McMoRan has restarted open pit production at its Grasberg mine in Indonesia, and the company expects underground mining to resume shortly. Furthermore, the labour contract negotiations have yet to be restarted, a process that poses a further risk of disruptions, according to Barclays view.

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