Gold prices traded around the unchanged mark on Friday as investors looked ahead to key data on inflation
CRUDE OIL – Oil prices were mostly unchanged on Friday as investors took a pause after four straight sessions of gains with black gold on track for a weekly rise of about 3.7%. Supporting bullish sentiment in crude this week, U.S. crude inventories registered a larger-than-expected draw and investors cheered data pointing to an increase in demand for oil from China as imports increased 13.8% to 8.55m bpd during the first six months of the year, compared to the same period a year ago. That outweighed the bearish news that OPEC compliance on the agreement to extend production cuts with non-OPEC members led by Russia by 1.8 million barrels per day through March 2018 hit 78%, its lowest level in six months. So far, the production-cut agreement has had little impact on global inventory levels due to rising supply from producers not participating in the accord, such as Libya and Nigeria, and a relentless increase in U.S. shale oil output. U.S. drillers added seven oil rigs, energy services company Baker Hughes announced last Friday, marking a 24th week of increases out of the last 25.
GOLD – Gold prices traded around the unchanged mark on Friday as investors looked ahead to key data on inflation and the state of the American consumer out later in the session. Gold was on track for weekly gains of 3% Friday in what would be its first positive close out of three. Remarks from Federal Reserve (Fed) chair Janet Yellen in her testimony to Congress this week suggested that the pace of future rate hikes would be gradual while weak inflation data lifted sentiment for the precious metal. Gold has fallen on the back expectations that the U.S. central would continue raising its key benchmark rate, decreasing investor demand for gold, as a rising interest environment increases the opportunity cost of holding the non-interest bearing precious metal. Still ahead on the economic calendar, June inflation figures will be released at 8:30AM ET (1230GMT) Friday. Market analysts expect consumer prices to ease up 0.1%, while core inflation is forecast to increase 0.2%. On a yearly base, core CPI is projected to climb 1.7%. Core prices are viewed by the Federal Reserve as a better gauge of longer-term inflationary pressure because they exclude the volatile food and energy categories. The central bank usually tries to aim for 2% core inflation or less. Rising inflation would be a catalyst to push the Fed toward raising interest rates. Rising retail sales over time correlate with stronger economic growth, while weaker sales signal a declining economy. Consumer spending accounts for as much as 70% of U.S. economic growth.
COPPER – The final SMM Copper Demand Surprise Index (SMMCDSI) was -56.98 in May, and the index was -2.14 in June, better than estimated data. SMM expects the index to come in at 3.52 in July, and market expectation direction changed. Over the past half year, markets had overestimated over copper demand in the peak season after the 2017 Chinese New Year holiday, but changed its mind from June, generally taking a pessimistic outlook for market fundamentals in the second half of the year.
ZINC – Eurozone May trade data and US June CPI due for release today are promising. Optimistic recovery in Europe and US will bolster base metals. But LME zinc met resistance from highs, and is expected to move between USD 2,790-2,830/mt today. Zinc smelters sold actively at highs, but downstream buyers only purchased as needed.
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