Gold slips as stronger dollar, risk-on sentiment weighs

* Dollar index at four-month peak

* Global share markets hit record highs

 Gold prices dipped on Tuesday as the dollar held firm and investors opted for riskier assets after a fall in the number of new confirmed cases of coronavirus in China eased some of fears over global economic impact.

Spot gold was down 0.3% at $1,567.26 per ounce by 1:43 p.m. EST (1843 GMT), having touched its highest since Feb. 4 at $1,576.76 on Monday.

U.S. gold futures settled down 0.6% at $1,570.10 an ounce.

“Gold is slightly down in tandem with another round of new highs across the board in equity markets, as there has been some conversation that the impacts from coronavirus are slightly overdone,” said David Meger, director of metals trading at High Ridge Futures.

However, “dips in gold are still being fairly bought very readily … given the strength seen in global equities and the fact that gold continues to hold up so well.”

Global financial markets scaled new highs as the number of new coronavirus cases slowed in China and the country’s factories slowly returned to work.

After more than 1,000 deaths, the China’s foremost medical adviser on the epidemic said infections may be over by April, with the number of new cases already declining in some places.

Further limiting gold’s appeal, the dollar hit a four-month high against a basket of rivals on safety buying and Federal Reserve Chair Jerome Powell’s upbeat view of the U.S. economy.

The U.S. central bank kept benchmark interest rates unchanged at its January policy meeting, citing moderate economic growth and a strong jobs market.

But in testimony before a U.S. congressional committee, Powell cited a potential threat from the virus and concerns about the economy’s long-term health.

“Gold’s longer-term bullish backdrop will remain primarily supported on physical demand from central banks and rising risks to the global growth that will trigger another wave of worldwide stimulus,” Edward Moya, a senior market analyst at broker OANDA said in a note.

Gold, which is used as an insurance against economic risks, tends to appreciate on expectations of lower interest rates, which reduce the opportunity cost of holding non-yielding bullion.

Among other precious metals, palladium fell 0.6% to $2,339.26 an ounce, silver dropped 0.7% to $17.63, while platinum rose 0.9% to $969.43.

 

Reporting by Brijesh Patel and Eileen Soreng in Bengaluru; Editing by Steve Orlofsky Editing by Marguerita Choy and Lisa Shumaker

 

David

LME metals rebound after Friday’s correction, but prices weaker in Shanghai

The broader markets were mixed on the morning of Monday February 10, with equities in Asia generally weaker, as were metals on the Shanghai Futures Exchange, while the London Metal Exchange was firmer across the board.

There is still much uncertainty around the impact of the Wuhan coronavirus (2019-nCoV), but with more businesses returning to work in China this week, we might get a better feel for the likely impact on Chinese demand.

With China generally a net importer of metals, the demand shock could well see inventories build up in the country and along the supply chains that supply China, while exports of products are also likely to continue to be disrupted.

China’s CSI 300 is up by 0.21%, while other Asian equity indices are lower

Gold prices are edging higher again, recently quoted at $1,571.40 per oz

Base metals

Three-month base metals prices on the London Metal Exchange were up by an average of 0.9% this morning, but this is after an average fall of 1.9% on Friday. Nickel led the gains this morning, with a 1.4% rise to $13,005 per tonne, followed by a 1.3% rise in tin to $16,500 per tonne, while copper is up 0.9% at $5,704 per tonne.

Trading volumes have been above average again with 9,871 lots traded as of 5.37am London time.

In China, the most-traded base metals contracts on the Shanghai Futures Exchange were, for the most part, weaker and down by an average of 0.4%, with April aluminium the only metal bucking the trend with a 0.1% gain, while April zinc led on the downside with a 1% fall. April copper was off 0.4% at 45,650 yuan ($6,532) per tonne.

The spot copper price in Changjiang was down by 0.6% at 45,260-45,315 yuan per tonne and the LME/Shanghai copper arbitrage ratio was at 8, compared with 7.99 on Friday. The ratio was around 7.88 before the Lunar New Year holiday.

Precious metals

Precious metals were firmer this morning. The spot gold price was little changed at $1,571.38 per oz, but that was up from $1,565.58 per oz at a similar time on Friday morning. Silver prices were also little changed at $17.73 per oz, while platinum and palladium were up by 1.1% and 0.8%, respectively.

Wider markets

The yield on benchmark United States 10-year treasuries has weakened and was recently quoted at 1.59%, compared with 1.63% at a similar time on Friday. The German 10-year bund yield was slightly weaker too and was recently quoted at -0.39%, compared with -0.37% at a similar time on Friday.

Asian equities were for the most part weaker this morning – with the Nikkei down 0.6%, the Kospi down 0.49%, the ASX 200 down 0.14% and the Hang Seng down by 0.56%), while China’s CSI 300 was down by 0.27%.

Currencies

The dollar index (98.63) is holding in high ground, but other major currencies are mixed, with the yen (at 109.83) firmer on the back of haven interest, the Australian dollar (0.6705) is also firmer, while sterling (1.2901) and the euro (1.0954) are weaker.

Key data

Economic data already out shows China’s consumer prices index rose 5.4% against an expected rise of 4.9%. The index has been climbing at a fast pace since February last year when it troughed at 1.5%. China’s producer price index climbed 0.1%, this after being negative since August last year. Japan’s economy watchers sentiment index climbed to 41.9, from 39.8 previously. Later there is data on Italian industrial production and EU Sentix Investor confidence.

In addition, Federal Open Market Committee members Michelle Bowman and Patrick Harker are speaking.

Today’s key themes and views

For now, concerns about supply disruptions from China seem to be lifting base metals prices on the LME, while weaker prices on SHFE seem to be reflecting the likely demand situation in China. Overall, the combination of China being a net importer of most base metals and with the country facing a negative demand shock, it would not be unreasonable to expect prices to be weaker, but this might already have been priced-in, given the price weakness seen in the second half of January.

We expect choppy trading in the days and weeks ahead, until more is known about how big the demand shock will be.

Gold prices are edging higher and are likely to continue to do so until more is known about when the Wuhan coronavirus will be brought under control. Prices might well have been rising at a faster pace were it not for the stronger dollar and generally strong equity markets.

 

Published onFebruary 10, 2020 09:08 AM By William Adams

David

Gold mine gangs tote AK-47s to outgun South African Police

Barberton Mines are now using state of the art equipment to trace illegal miners. Gold mines offer soft targets for syndicates that previously specialized in cash-in-transit heists. Picture: Simphiwe Mbokazi

JOHANNESBURG – At 10 p.m. on the second Sunday in December, a criminal platoon armed with AK-47 and R6 assault rifles stormed one of the largest gold mines still operating on South Africa’s fabled Witwatersrand basin.

Moving with military precision, the 15 attackers took hostages and plundered the smelting plant at Gold Fields Ltd.’s South Deep mine. While failing to break into the main vault, the gang escaped three hours later with gold concentrate worth as much as $500,000.

Violent crime soared through a decade of kleptocracy and graft under South Africa’s former President Jacob Zuma.

Gold mines offer soft targets for syndicates that previously specialized in cash-in-transit heists.

Their foot-soldiers outgun a demoralized police force and pile woes on a gold industry in the final stages of a decades-long death spiral.

“Mining companies are being attacked by thugs and armed gangs and there is a lack of police response,” said Neal Froneman, chief executive officer of Sibanye Gold Ltd., which repelled an attack on its Cooke mine two weeks ago. “It eventually has a knock-on impact into society, it’s lawlessness, it’s anarchy.”

There were 19 attacks on gold facilities last year, almost double the number in 2018, according to South Africa’s Minerals Council. More than 100 kilograms (3,527 ounces) of gold was stolen in 2019 as bullion rose to a five-year high, although not all companies disclose their losses, said the council, which represents the nation’s largest miners.

The attacks are part of a wave of violent crime. Murders in South Africa climbed to the highest in a decade, with an average of more than 50 people killed each day. Violent robbery has surged and last year President Cyril Ramaphosa’s government deployed the army in Cape Town to quell gang-related killings.

Ramaphosa has made combating crime a top priority since taking office in one of the world’s most unequal societies in 2018. While the violence is partly a legacy of apartheid rule that ended in 1994, his efforts have been hindered by the gutting of the National Prosecuting Authority and other law-enforcement agencies under his predecessor Zuma.

“The fundamental problem is police are not getting on top of organized violent crimes,” said Gareth Newham, who heads the justice and violence prevention program at the Institute for Security Studies in Pretoria. “We are seeing a deterioration in our policing capacity.”

An abandoned shaft at the Blyvooruitzicht Gold Mine near Carletonville proves attractive for illegal miners. Gold mines offer soft targets for syndicates that previously specialized in cash-in-transit heists.

After meeting with gold mining companies in October, Minister of Police Bheki Cele is considering plans to set up a task force to tackle the violence, said Lirandzu Themba, a spokeswoman for the ministry.

When 50 robbers overwhelmed security at Gold One International Ltd.’s smelting plant in May, the police held back from engaging with the gang after they were fired on, according to Jon Hericourt, vice president of operations at the Chinese-owned miner. Since the gang made off with an unspecified quantity of gold, the police have only provided scant information on its investigations, he said.

Gold One has beefed up security and switched its focus from thwarting internal theft to combating all-out assaults. Still, Hericourt doubts that will be enough.

“It’s not a mining company’s job to take on gangs like this, it’s the government’s job,” he said.

Sibanye has also strengthened its defenses after the nation’s biggest gold producer repelled several attacks last year, said Head of Security Nash Lutchman. Combat training is now standard practice for guards, who wear bulletproof jackets and patrol in armored vehicles at night.

Still, their shotguns and 9-millimeter pistols can’t compete with the automatic weapons used by gangs. The raids take months to plan, with the gangsters coercing mine employees into providing inside knowledge, Lutchman said.

“It’s military precision in terms of planning and execution,” he said. “No smelting plant is going to have sufficient manpower and fire power to defend an onslaught from 20 or 30 attackers.”

Gold mines offer soft targets for syndicates that previously specialized in cash-in-transit heists.

In the final quarter of 2019, both Harmony Gold Mining Co Ltd. and DRDGold Ltd. suffered fatalities during assaults.

The attacks are putting additional pressure on South Africa’s 130-year-old gold industry, forcing companies to increase spending at often marginal mines that were already battling against incursions by illegal miners. That’s compounding the geological challenges of the world’s deepest mines, deterring investors already concerned by the country’s power-supply crisis.

“It can potentially have a knock-on effect to potential investors as well because they are not going to invest in gold in South Africa because it’s too risky,” said Gold One’s Hericourt.

 

8 FEBRUARY 2020, 07:00AM / FELIX NJINI

David