Commodities: Gold consolidates as market mulls over Trump’s latest tax reform plan

Gold consolidated on Thursday, after a two day fall of 2.71%, trading marginally higher by 0.1% to $1,284/Oz.

The recent strength of the US dollar hadsparked a sell-off in the precious metal, but on Thursday markets were focused on US President Donald Trump’s tax reform plans.

Expectations of higher US debt levels and a December interest rate rise pushed 10-year Treasury yields to a 2 1/2-month high, helped by data pointing to underlying strength in the US economy and a hawkish speech by Federal Reserve Chair Janet Yellen. All these factors sent December gold 0.09% down to $1,287/Oz..

“These developments are not something gold can thrive on,” said Saxo Bank analyst Ole Hansen. “It’s natural we see weakness coming through.”

“The fund long position has not been much reduced in recent weeks even though gold has retraced half of its July-to-September rally […] That indicates gold is less exposed to a major selloff,” he said.

Among the other precious metals, silver traded 0.24% higher to $16.81/Oz while platinum fell 0.27% to $919/Oz., while palladium was 0.19% firmer at $935/Oz.

Both metals are primarily consumed by automakers for catalytic converters, but platinum is more heavily used in diesel vehicles – which have fallen out of favour.

“In the long run, we believe palladium and platinum could trade at similar levels,” said Samson Li, an analyst with Thomson Reuters GFMS, adding, “The strength of palladium this year is due to the strong performance of the Chinese auto sector. Sales have been better than expected […] Palladium is like a growth stock while platinum is like a value stock now.”

Bargain hunters helped lift copper 1.13% on Thursday to $6,523/tonne as speculators judged prices as good value after recent losses and lifted by hopes of steady economic growth in top metals consumer China.

Alastair Munro at Marex Spectron said in a note, “With long liquidation having been a recent theme across the base complex, some good Far Eastern buying and borrowing has been evident in the last 24 hours – particularly on copper and nickel.”

Sounding slightly more downbeat on the base metals future outlook, Dan Smith at Oxford Economics said, “The demand picture for copper and most base metals is not that good. A lot of sentiment around China is quite bullish at the moment and I don’t think that’s really justified from what we see in terms of the industrial side of the economy.”

Tensions in northern Iraq helped Brent to $58/barrel, where it faced heavy resistance to trade 0.16% lower to $57.25/barrel for January delivery, while US West Texas Intermediate crude (WTI) fetched $52.51/barrel, down 0.27%.

Turkey promised on Thursday to deal only with the Iraqi government on crude, “restricting oil export” operations to Baghdad, the office of Iraqi Prime Minister Haider al-Abadi said.

Iraqi Kurdistan voted overwhelmingly in favour of independence, prompting Turkish President Tayyip Erdogan to say he could use force to prevent the formation of an independent Kurdish state and might close the oil “tap”.

“Kurdistan and northern Iraq now export 500,000-550,000 barrels per day (bpd). That would be a big loss to the market,” said Tamas Varga, analyst at brokerage PVM Oil Associates.

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