Softer dollar spurs base, precious metals higher

Base and precious metals were higher on Tuesday morning in the US – the first trading day of the week here after the Labor Day weekend – amid reduced expectations of a Federal Reserve rate increase in the near term, which pressured the dollar lower.

Copper for December settlement on the Comex division of the New York Mercantile Exchange gained 1.35 cents or 0.7 percent to $2.0915 per pound. Trade has ranged from $2.0720 to $2.0990 so far.

And Comex gold for December delivery rose $11.50 or 0.9 percent to $1,338.20 per ounce. Earlier, the contract touched $1,339.70, its highest since August 23.

On Friday, the non-farm employment report missed expectations, raising questions about whether the Fed can increase the Federal Funds rate when the policy board meets on September 21. Despite unemployment standing at 4.9 percent and signs of wage growth, weak GDP results and uncertainty from the rest of the globe is weighing on market expectations.

In response, the dollar index slipped to 95.67, with investors only seeing a one-in-four chance that the US central bank will raise rates. Another increase is unlikely until 2017, according to the CME Group FedWatch tool.

“Gold prices will trend higher still, largely driven by lower Fed tightening expectations,” FastMarkets analyst Boris Mikanikrezai said. “Given our view that the Fed is unlikely to move in September, the current probability of a September move is likely to fall steadily lower, talked down by the Fed. This should boost gold prices.”

Market action will be strongly influenced by various Fed speeches until the meeting but, after a muted August, investment activity should increase over the month.

Investors are now awaiting data from China for more direction – trade data is due on Thursday ahead of CPI and PPI inflation readings on Friday while industrial production, retail sales and fixed asset investment readings are scheduled at the start of next week.

The USM non-manufacturing PMI, IBD/TIPP economic optimism and labour market conditions index from the US are due later today.

Turning to international markets, Germany’s DAX and France’s CAC-40 were up 0.3 percent and 0.1 percent respectively while the dollar softened by 0.1 percent to 1.1160 against the euro.

In other commodities, light sweet crude (WTI) oil futures on the Nymex were unchanged at $44.44 per barrel. The most active Comex silver contract was last at $19.675 per ounce, up 30.9 cents.

(Editing by Mark Shaw)

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Source: Bullion Desk News

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