Copper prices in focus with fresh supply coming on stream
By V. Phani Kumar and Sarah Turner, MarketWatch
HONG KONG (MarketWatch) — Gold futures were a touch weaker in Asian trading hours Wednesday, as the dollar strengthened after attention turned to the little progress being made to resolve the U.S. fiscal cliff.
Gold futures for delivery in December GCZ2 -0.21% slipped 0.2% to $1.738.50 an ounce in electronic trading, adding to the $7.30 loss on the Comex division of the New York Mercantile Exchange the previous day.
James Steel, an analyst at HSBC Securities, said that the yellow metal has failed to build on last week’s rally partly because concern about the U.S. fiscal cliff has introduced a high degree of uncertainty.
“Now, with the Greek [financial- aid] issue apparently resolved, at least for the time being, the ‘fiscal cliff’ talks are likely to dominate gold-investor attention,” said Steel, referring to the agreement reached by Greece’s creditors to disburse the next tranche of bailout funds to the country.
The fiscal cliff refers to the $600 billion of tax increases and spending cuts that will kick in from January unless U.S. politicians reach an agreement to avert the event. The cliff is feared to have the potential to push the U.S. economy into a recession.
Steel cautioned, however, that “if gold doesn’t resume an upward advance, it is possible that recent longs will tire and begin liquidating positions.”
The ICE dollar index DXY +0.08% , which measures the greenback’s moves against a basket of six major global currencies, rose to 80.414 from 80.360 in North American trade late on Tuesday.
The dollar’s advance weighed on other metals as well.
Among other precious metals, the December contract for silver SIZ2 -0.28% and palladium PAZ2 -0.84% fell 0.4% to $33.84 an ounce and 1.1% to $661.15 an ounce, respectively.
January futures for platinum PLF3 -0.80% declined 0.8% to $1,605 an ounce.
Copper
Copper for December delivery HGZ2 -0.42% shed 0.4% to $3.52 a pound, with some analysts remaining downbeat about the base metal’s prospects in the coming year.
BNP Paribas metals strategist Stephen Briggs said that while he expects copper to “fully participate” in a likely year-end base-metals rally, an anticipated increase in supply may begin to weigh on prices from 2013.
Two leading copper mines — Escondida in Chile and Grasberg in Indonesia — are expected to substantially increase production by 2014, he noted.
“The current price, let alone one potentially 10% higher, will come to look elevated for a market starting to move into a small surplus with larger surpluses in prospect for 2014-15,” he added.
