Commodities: Greenback on the backfoot after Yellen speech, gold the main beneficiary

Safe haven gold stuck to a $20 dollar range on Friday, with a low of $1,275/oz. and a high of $1,295/oz. by 1600 BST, thanks to comments from Fed chair Janet Yellen, who was speaking at the Jackson Hole symposium of central bankers.

Ahead of her speech, Dallas Federal Reserve Bank President Robert Kaplan called for patience on raising interest rates any further but urged speed in reducing the bank’s balance sheet. The focus of Yellen’s speech was on reforms and financial stability since the banking crisis and made no reference to US monetary policy, but did indicate that any future changes should remain modest.

This was enough to send the dollar index 0.56% lower to 92.750 by 1630 BST, making gold more affordable for holders of other currencies.

Similar price action was seen on silver which was up 0.6% to $17.08. In other precious metals, platinum dipped 0.3% to $977/oz. and palladium down 0.20% to $934/oz. after earlier touching a 16-year high of $940.

LME (London Metal Exchange) traded copper fell back a little on Friday as traders closed out positions ahead of a long weekend in the UK. Earlier in the session, the base metal hit a high of $6,748/tonne which seemed like an opportunity to take profit after a three-month meteoric rise for the industrial metal.

“I share the view that copper is over-extended and that a correction is due, but every correction needs a trigger,” said Julius Baer at Carsten Menke, adding that a rebound in the dollar, along with a slowdown in top consumer China, could be two such triggers.

A sentiment not shared by Nicolas Snowden at Barclays, who told Bloomberg today, “Getting short in any base metal is risky right now when you have this broad positive macro theme and increasing investor participation, particularly in China’s onshore market,” referring more to fresh short contracts rather than closing out long positions.

Energy markets edged higher on Friday as US producers braced for hurricane Harvey’s impact on the Gulf Coast, with WTI for December delivery up 0.43% to $48.18/barrel and October benchmark brent higher by 0.25% to $52.22.

Citigroup estimated that more than two million barrels of output may be affected by the storm.

Hamza Khan at ING added, “It’s the gasoline market which is reacting strongly to the hurricane, with refining capacity in Texas shutting,” adding that “potential damage that refineries in the region experience once the storm makes landfall” could “provide further support to gasoline prices.”

On the agricultural front, soybean futures for November were down slightly to $9.45/bushel while December cotton was 2% lower to $0.6855/lb.

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