Commodities: Positive US data strengthens greenback, commodities lose ground
With the positive US retail sales report showing volumes up by 0.6% on the month for July, the dollar index has seen its strongest level since the start of the month, up 0.44% on the day.
That, coupled with a simmering down of tensions between the US and North Korea, took some of the shine off gold on Tuesday as the precious metal traded 0.69% lower with gold for December delivery falling to $1,279.
Lyn Graham-Taylor at Rabobank said, "There is a more relaxed attitude being taken towards the Korean situation in markets. With the report that North Korea has put its plans on hold, there is a sense of stepping back from the brink." This view was echoed by Robin Bhar at Societe Generale who said, "Global tensions now seem to be ratcheting down."
In other precious metals, spot silver was seen trading 2.35% lower to $16.68/oz., platinum was also lower trading at $958/oz. by the London close and palladium closed the day at $893, 0.3% lower.
The stronger greenback and cooling off in geopolitical tensions was very much the theme of the day and helped push energy markets lower with WTI (West Texas Intermediate) crude for September delivery down 0.08% to $47.56/ barrel and the October contract for Brent retreating 0.68% to $50.69 by 1700 BST.
Prices for both grades of oil seem to be in a slight quandary at the moment as inflationary factors include a production cut from OPEC (Organisations for Petroleum Exporting Countries) and non OPEC member countries, battling against increasing production in Libya and US shale output rising to record levels.
Speaking on recent factors weighing on oil prices, Harry Tchilinguirian at BNP Paribas said, "As much as oil inventories have been coming down in the U.S., which is something that is seasonally normal, the fact that U.S. shale production is very resilient and is again confirmed by this EIA Drilling Productivity Report, that is something that is weighing on the market’s mind."
"Brent Crude oil and WTI are lower on the day as the concerns about over-supply and weak demand in the oil market persist, and the rally in the US dollar has made matters worse." said David Madden at CMC Markets, adding "The slowdown in China was underlined by the softer than expected industrial production figures yesterday. The increase in the number of active oil rigs in the US is adding to concerns that supply is excessive also."
In base metals, copper was down on the day 0.49% by 1730 BST to trade at $6,381/tonne on the back of a stronger dollar. Commerzbank technical analyst Axel Rudolph said in a note that copper may revisit its two-month support line at $6,290.88 as it takes a breather, but later in the year may reach $6,635 stating, "We will retain our medium-term bullish forecast while no unexpected drop below the July 20 low at $5,945.50 is seen."
Speculative demand for copper increased with open interest in futures for the red metal hitting the highest level on record, with hedge funds' bullish bets climbing to all time highs last week, SP Angel said in a note.
Cocoa in New York for December delivery was down 3.31% on the day to $1,860/tonne on a stronger dollar with Reuters pointing to excess supplies from farmers in the Ivory Coast, adding that the next harvest ws likely to be abundant for the first three months possibly starting as early as mid-September.
The December contract currently trades at support areas last seen on 22 June and 12 July.
December arabica coffee was also down on the day by 3.43% to trade at $1.3615/lb with weakness said to be driven by deteriorating charts and slowing momentum after a short covering rally earlier this month.