What Made Copper, Gold, and Silver Weaker on Wednesday Morning?


May. 4 2016, Published 6:23 a.m. ET

Copper is trading lower

Copper is trading lower on Wednesday morning because of the stronger dollar and China’s weak manufacturing data released recently. Hawkish comments from Fed officials along with the rebound of the dollar are weighing on metal prices this morning. At 6:25 AM EST, the COMEX copper futures contract for July delivery was trading at $2.20 per pound—a loss of 0.68%.

The slightly weaker Chinese purchasing managers’ index data weakened the sentiment around copper. This resulted in declining prices on May 3. Major copper producers Freeport-McMoRan (FCX), Glencore (GLNCY), BHP Billiton (BHP), and Rio Tinto (RIO) fell 11.4%, 7.2%, 5.1%, and 6.2%, respectively, on May 3. The PowerShares DB Base Metals Fund (DBB) and the SPDR S&P Metals & Mining ETF (XME) fell 2% and 5.0%, respectively, on May 3.

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Dollar keeps pressure on precious metals

At 6:25 AM EST, the COMEX gold futures contract for June delivery was trading at $1,281.45 per ounce—a fall of 0.80%. Silver was trading at $17.27 per ounce—a decline of 1.2%. On May 3, precious metal producers Barrick Gold (ABX), Newmont Mining (NEM), Royal Gold (RGLD), and Silver Wheaton (SLW) fell 3.8%, 1.5%, 2%, and 3.8%, respectively. The SPDR Gold Trust ETF (GLD) fell 0.23%. The iShares Silver Trust (SLV) fell 0.42% on May 3. The weakness in gold and silver prices is mainly due to the strong dollar and hawkish comments by Fed officials.

June hike is a “real option” according to Dennis Lockhart

The chief of the Federal Reserve Bank of Atlanta, Dennis Lockhart, said that there’s a possibility for two interest rates hikes in 2016. However, it depends on how the economy performs. According to the analysis of CME Group’s fed fund futures, investors think that there’s a 13% probability of an interest rate hike in the June meeting. Lockhart said that there’s more probability of a hike in June. He said that it’s a “real option.” The weaker dollar and lower interest rates will support gold prices. However, the current sentiment around the dollar and comments from Fed officials are keeping pressure on gold prices on May 4.


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