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Commodities: Safe-haven gold feasts on geopolitical stew to rebound higher

By Andrew Schonberg

Date: Tuesday 04 Apr 2017

Commodities: Safe-haven gold feasts on geopolitical stew to rebound higher

(ShareCast News) - Gold is rebounding on Tuesday afternoon as investors like the safe-haven metal amid a stew of concerns comprising Brexit nerves, European political risk, Trump uncertainties and Opec output pledges.
At about 15:16 GMT, on Comex, gold was up 0.41% to $1259.20 an ounce. Silver rose 0.76% to $18.35 an ounce, and copper rose 0.31% to 261.15 cents a pound.

"This yellow metal has sprung towards $1260 on Tuesday with further inclines expected as bulls exploit the market anxiety to install fresh rounds of buying," said FXTM research analyst Lukman Otunuga.

"The source behind this wave of risk aversion is the uncertainty gravitating around the pending Trump-Xi summit, which investors will be paying heavy attention towards," he said.

US President Donald Trump was due to meet China's President, Xi Jinping, in the US this week in Florida, with trade and the sensitive issue of North Korea high on the agenda.

Otunuga added that with meeting participants already jittery, potential complications could accelerate the flight to safety ultimately elevating gold's price further.

Risk aversion was a key theme this week, he said, noting a daily close above $1260 could open a path towards $1300.

"The amalgamation of overall geopolitical concerns, political risks in Europe, Brexit woes and Trump uncertainties have boosted the appetite for safe-haven assets with gold in high demand."

Mike van Dulken and Henry Croft, both analysts at Accendo Markets, said the yellow metal had overcome nine-month falling highs resistance as it rallied back above $1255 an ounce.

They, too, highlighted geopolitical concerns being to the fore in investors' minds.

"A weak US Manufacturing PMI print raised fresh concerns that the US Federal Reserve may not stick to its hawkish forecasts for three rate hikes over the course of 2017, seeing the non-yielding safe haven asset subsequently benefit," said van Dulken and Croft.

Michael Hewson, chief market analyst at CMC Markets UK, said gold prices rose as continued uncertainty around the direction of US fiscal policy kept investors cautious.

Three-month industrial metals on London Metals Exchange were down. Zinc continued its decline with a tumble of 2.27%. Copper extended its with a slide of 1.45%. Tin and aluminum were down 0.62% and 0.54%, respectively.

Meanwhile, also at about 15:16 GMT, Nymex-priced WTI crude was up 0.58% to $50.53 a barrel. Intercontinental Exchange-traded Brent was 0.85% up to $53.57 a barrel.

"WTI Crude may be in the process of a technical bounce which could test the $51 pivotal level," said Otunuga.

"Bears need to break back below $50 to reclaim control with targets stretching back towards $47," he added.

Oil continued to be caught in a chronic glut, with Opec pledges constantly in focus, alongside US shale production, rising US inventories and rising US rig counts.

"Although there are speculations of Opec extending the supply cut deal by another six months to fight the oversupply woes, optimism is rapidly fading over the cartel's ability to elevate oil prices," he said.

Hewson said the rebound in oil came despite higher US rig counts and the return of Libyan production.

"There appears to be an expectation that the next lot of inventory data will support Opec secretary general (Mohammed) Barkindo's assertion that the oil market is slowing coming back to balance and that we will see a fall in US stockpiles when inventory data is released later today and tomorrow."

A Bloomberg survey of analysts ahead of the latest weekly Department of Energy stockpile data revealed expectations for a drop of 700,000 barrels in commercial US crude oil inventories.

The data was scheduled for release on 5 April at 1530 GMT.

Business lobby group The American Petroleum Institute was set to publish its own weekly estimates beforehand, on Tuesday evening.

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