Gold – Gold held steady on Thursday as the dollar weakened after minutes from a U.S. Federal Reserve meeting suggested that the central bank could take a more cautious approach to interest rate increases. Fed policymakers had agreed at the meeting that they should hold off from raising rates until it is clear that a recent U.S. economic slowdown is only temporary, though most said an increase is coming soon. Higher interest rates tend to boost the dollar and push bond yields up, increasing the opportunity cost of holding non-yielding bullion and thereby pressuring gold prices. Federal fund futures implied that traders believe there is an 83 percent probability that the Fed will raise rates by a quarter of a percentage point at its June meeting, according to Fed Watch tool. Expectations for U.S. interest rates to rise next month and potentially again later in the year have been a major factor in keeping gold prices pinned below.
CRUDE OIL – The Organization of Petroleum Exporting Countries (OPEC) confirmed on Thursday that both the cartel and non-OPEC members led by Russia have agreed to extend its output cut agreement for another nine months and expect to reach supply target by the end of 2017. OPEC president and Saudi Arabia’s energy minister Khalid Al-Falih said that oil producers had discussed the length of the extension as ranging from 6 to 12 months but decided that “the nine month (extension) is the optimum”. Al-Falih admitted that they also discussed even higher production cuts but that they felt that current levels were sufficient to “reach the five year average by the end of the year” and expected to reach target before year-end. He explained that the extension was made through the end of March 2018 simply to “avoid the typical seasonal stock build”.
COPPER – Copper prices hit three-week highs on Thursday as worries about prolonged disruptions at the giant Grasberg copper mine in Indonesia triggered short-covering before a long holiday weekend in Europe and top consumer China. The Dragon Boat Festival in China on Monday and Tuesday and public holidays in much of Europe on Monday have subdued volumes in industrial metals markets. An estimated 9,000 workers at Grasberg operated by Freeport McMoRan will extend a strike for a second month in an ongoing dispute over employment terms and layoffs. A weaker U.S. currency makes dollar-denominated commodities cheaper for non-U.S.- firms, which could potentially boost demand for metals. Moody’s downgraded China’s credit rating for the first time in nearly 30 years. China accounts for nearly half of global copper demand estimated at about 23 million tones this year. Focus in aluminum is on plans by Chinese authorities to clampdown on polluting industries. China produces more than half of the world’s aluminium, estimated at around 60 million tones this year.
ZINC – Zinc dropped tracking LME prices dropped by 0.9 percent lower at $2,635 on concerns that slowing economic growth in China. This week zinc prices surged on the back of a sustained crackdown in China’s polluting steel industry, which fuelled worries about supply. The global zinc markets fell into a deficit in March after surpluses in February, data from the International Lead and Zinc Study Group (ILZSG) showed.
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