GOLD – Gold eased after setting a one-month high on Tuesday in response to rising political uncertainty in Europe which spurred increased safe haven demand. The metal, often seen as an alternative investment during times of political and financial uncertainty, benefited from a risk-averse mood in global markets along with the Japanese yen and U.S. Treasuries. Investors are concerned about next week’s election in Britain, as well as the prospect of early elections in Italy and worries over Greek debt, which analysts said supported gold and dented stocks. A poll in Britain on Tuesday showed Prime Minister Theresa May’s lead over the opposition Labor Party dropping to 6 percentage points ahead of the election on June 8. In Italy, former prime minister Matteo Renzi suggested on Sunday that the country’s next election be held at the same time as Germany’s. Germany will vote on Sept. 24, while elections are due in Italy by May 2018. Euro zone finance ministers’ failure to agree on Greek debt relief with the International Monetary Fund last week also added to risk aversion.
CRUDE OIL – Oil prices fell on Tuesday on concerns that output cuts by the world’s big exporters may not be enough to drain a global glut that has depressed the market for almost three years. The Organization of the Petroleum Exporting Countries and other oil producers, including Russia, agreed last week to keep a tight rein on supply until the end of the first quarter of 2018, i.e. nine months longer than originally planned. Collective output by OPEC and other producers will be held around 1.8 million barrels per day (bpd) below its level at the end of last year. But the cutbacks have yet to drain inventories significantly and prices fell sharply after the OPEC deal was announced. Part of the problem for OPEC is oil supply in the United States, where shale production is booming. U.S. drillers have added rigs for 19 straight weeks to reach 722, the highest since April 2015, according to services firm Baker Hughes. Goldman Sachs analysts have reduced their forecasts for oil prices, saying falling U.S. production costs will keep supply rising for years to come. The bank said that once OPEC’s production growth resumes after its self-imposed cuts, U.S. and OPEC output would rise by 1 million to 1.3 million bpd between 2018 and 2020. The American summer driving season, which by tradition started on the Memorial Day holiday on Monday, may offer some support for prices. Demand in the United States for transport fuels tends to rise as families visit friends and relatives or go on vacation during the Northern Hemisphere summer.
COPPER – The price of copper fell on Tuesday in quiet trade as the market waited for top metals consumer China to return from a public holiday and data on Wednesday that is expected to show a slowdown in Chinese industrial growth. The Shanghai Futures Exchange was closed for the Dragon Boat Festival and will reopen on Wednesday. PMI data due on Wednesday is expected to show factory activity in China grew at its slowest in eight months, suggesting that manufacturing will be slower through 2017. Prices were supported by a drop in on-warrant stocks available to the market in LME-registered warehouses, falling to 153,500 tones after 7,625 tones of cancellations. On-warrant stocks have decreased by a third since mid-April. Companies have stepped up their requests for engineers and other positions at early stage mining projects in Chile, a local recruiter said. Concerns over early Italian elections and Greece’s debt crisis drove European shares down for a fourth day, while the dollar touched its highest since May 19. A stronger dollar makes metals more expensive for holders of other currencies. Euro zone economic sentiment suffered an unexpected decline in May, EU data showed. A global aluminum producer has offered Japanese buyers a premium of $123 a tone for July September primary metal shipments, down 4 percent from the current quarter, sources told Reuters.
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