TORONTO (miningweekly.com) – Metals prices, which had traded in a steady-to-positive range until Wednesday’s decision by the US Federal Reserve to raise federal interest rates by 0.25%, have given back some of their gains.
In the wake of the highly anticipated move to rein-in the US’s loose monetary policies of the past several years, the focus for metals could shift more on supply/demand fundamentals and less on dollar strength, UK-based boutique advisory firm SP Angel analyst Carole Ferguson said on Thursday in a note to clients.
The analyst noted that the greenback had appreciated 11% against a basket of major currencies, with the dollar index appreciating from 89.13 to 98.66 over a year.
For the dollar index this reflected as much Euro weakening as dollar strength with the Euro forming 57.6% of the index and weakening by 12% over the same period, Ferguson noted.
Moves against other currencies such as the Yen and sterling had been more modest at 3% and 4%, respectively.
Against commodity currencies such as the Australian dollar and the South African rand, the US dollar had appreciated by 11% and 27%, respectively.
SP Angel advised that at the same time, the Bloomberg commodity index that included a broad range of commodities from metals to agriculture, had fallen by 29.5%.
Copper had fallen by 28%, gold by 10% and Brent crude by 45%, with the latter reflecting more the disruptive move by the Saudis within Organisation of the Petroleum Exporting Countries, Ferguson noted.
“Re-assertion of supply/demand fundamentals will need greater clarity in terms of Chinese demand where the pace of the fall in demand has caught the market by surprise this year. Against this backdrop a steadying of prices will be a good result till further news emerge on either demand pick up or supply cuts,” Ferguson advised.
The TSX, one of the most important stock exchanges for miners and mineral project developers, on Thursday closed down 1.19% at 13 009.93 points, with the Metals & Mining Index losing 3.22%, or 9.99 points to close at 300.50. Barrick Gold fell nearly 8% to C$9.69, while Goldcorp was down 6.6% at C$15.26 apiece.
The Energy Index also closed down nearly a per cent at 156.29 points, dragged down in the wake of falling North American benchmark oil prices at $34.95/bl. TransCanada fell 3.3% to C$46.56. The company on Thursday announced that it had increased the estimated cost of its Energy East crude oil pipeline by 30% to C$15.7-billion, when it filed an amendment to its application with Canadian regulators.