Commodity markets benefit from dollar weakness

The copper and gold price were on pace to end the week on an optimistic note, although commodities were under considerable pressure this week and set fresh lows in previous sessions.

Copper for December settlement on the Comex division of the New York Mercantile Exchange gained 1.10 cents or 0.5% to $2.1665 per pound. Trade has ranged from $2.1475 to $2.1830.

Comex gold for December delivery ticked up $3.40 or 0.3% percent to $1,256.40 per oz. Yesterday, the contract dipped to the lowest point since June 22.

Prices saw a broad-based capital exit this week after the dollar reached the highest mark since July 25, but after disappointing US jobs data, the dollar index slipped to 96.64.

In September, 156,000 Americans joined the labour market, below the forecast of 171,000 but another sign that the US economy is heading for its eighth year of expansion. As well, the previous month’s reading was revised upward to 167,000 from 151,000.

While average hourly earnings were in line with projections at 0.2 percent, the headline unemployment rate increased to 5% from 4.9%.

The market will now look to see how the Federal Reserve will react to the latest data points with roughly 60 percent of investors expecting the Fed to raise rates in December. With no October meeting and a presidential election approaching, December is widely seen as the last possible time for the Fed to restart the process of interest-rate normalisation.

However, the FOMC is deadlocked on when to raise rates, with the hawks wanting to move soon while the doves are awaiting signs of inflation.

“Financial markets are too worked up about a possible ECB taper and Fed November rate hike,” Georgette Boele, a strategist at ABN AMRO, said. “When these expectations ease again gold prices should receive some support.”

Meanwhile in US markets, the Dow Jones industrial average and S&P were down 0.1% and 0.3% respectively, while the dollar softened 0.2% to $1.1171 against the euro.

In other commodities, light sweet crude (WTI) oil futures on the Nymex tumbled 58 cents or 1.2% to $49.86 per barrel, while the most active Comex silver contract stood at $17.495 per oz., up 15 cents.

(Editing by Tom Jennemann)

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