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Gold Edges Lower as Market Fear Abates

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09/12/2017 | 03:24 pm


By Amrith Ramkumar



Gold prices were on track for a second straight day of losses Tuesday after United Nations sanctions against North Korea were less severe than many initially expected.



Gold for December delivery was recently down 0.3% at $1,331.60 a troy ounce on the Comex division of the New York Mercantile Exchange, falling further after its worst day in more than two months Monday. U.S. officials eased their demands for sanctions against North Korea Monday after North Korea didn't conduct a weekend missile test as many had previously predicted.



Some analysts said the latest developments between the two countries removed some fear in the markets, with the U.N. Security Council sanctions less stringent than the U.S. initially requested.



"This is clearly a relief for market participants and is generating higher risk appetite," Commerzbank analysts wrote in a Tuesday note.



Analysts and investors have also said that demand for haven assets has weakened early in the week because damage from Hurricane Irma was less severe than expected. Many investors favor gold during times of geopolitical uncertainty.



Another factor weighing on gold prices Tuesday was the dollar ticking higher, which makes gold more expensive for foreign buyers. The WSJ Dollar Index, which tracks the U.S. currency against 16 others, was recently up 0.1% and on track for a second straight day of gains after closing at its lowest level in more than two years Friday.



Among base metals, copper for December delivery was recently down 1.2% at $3.0295 a pound. Since crossing $3.15 last week, the industrial metal has fallen roughly 4%. Many analysts have cautioned that record amounts of speculative buying have left copper susceptible to a pullback because the market is currently relatively balanced.



Some have said the rally's upward momentum has gotten ahead of fundamentals, even with confidence in the global economy pushing prices to nearly three-year highs.



"It just didn't really seem there was anything behind it other than investor froth," said Vivienne Lloyd, a base-metals analyst at Macquarie Group.



The industrial metal fell 0.89% to $6,687.50 a metric ton in midmorning trade in London, with the rest of the base complex also pulling back.



Gold, too, continued to edge lower, falling 0.08% to $1,326.18 a troy ounce, with last week's belligerent back-and-forth between the U.S. and North Korea receding further into the background of geopolitical affairs.



The end of last week saw copper prices start to pull back after months of upward movement, which analysts said was based more on trader optimism about the state of the Chinese economy than it was on supply and demand fundamentals.



"Today we're really just seeing copper settling into that lower range. Friday's selloff was no surprise given how long the market was and it was only a matter of time before the pressure valve was released by some profit-taking," said Kash Kamal, a senior analyst at Sucden Financial.



Data for London Metal Exchange copper, released Friday, revealed that trader bets on copper prices continuing to rise were at their highest since 2004, according to broker Marex Spectron.



Now, though, "with sentiment and fundamentals now looking more aligned, it looks as though prices might consolidate on the previous resistance level of $6,670 where it traded earlier today," Sucden's Mr. Kamal said.



Meanwhile, Chilean data for July 2017 showed mined copper production up 5% for the month year-over-year, although that did little to move the needle on year-to-date production, which is still 7% down on-the-year, according to a note from ING, after strikes at BHP Billiton's mine at Escondida.



Peru's year-to-date output, meanwhile, has been slightly higher, according to Investec.



Traders were looking out for Chinese data on industrial production, expected Thursday, as well as credit and monetary supply data, also due this week.



Among precious metals, silver fell 0.06% to $17.80 a troy ounce, palladium gained 0.51% to $954.05 a troy ounce, and platinum fell 0.39% to $987.75 a troy ounce.



Among base metals, zinc fell 0.73% to $3,065.50 a metric ton, aluminum fell 0.09% to $2,119.50 a metric ton, tin fell 0.22% to $20,705 a metric ton, nickel fell 1.69% to $11,635 a metric ton and lead fell 0.50% to $2,267 a metric ton.





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