Yellen Rebounds Commodities From Gold to Copper


Federal Reserve Chair Janet Yellen’s dovish message yet again ignited a commodities rebound, pushing up everything from gold and copper to miners, including Freeport-McMoRan Inc. and Teck Resources Ltd.

On Wednesday, the Fed announced they would not be raising interest rates as far as they forecast in December, during a weakening global economic growth. This led to a surging of gold prices just after futures capped the longest slump since November. 14 gold miners climbed to the highest in more than a year, while the Bloomberg Americas Mining Index rose to an eight-month high.

Image credit: Bloomberg

“With loose monetary policy and low rates, we’ll have a lot of money out there in the system and demand will be higher,” said Bob Haberkorn, a senior market strategist at RJO Futures in Chicago. “The miners are benefiting from this because the trends on the physicals look to be higher, be it gold, platinum, silver, copper, or any of the other base metals for that matter.”

After pushing through the turmoil in early March’s financial markets, which helped boost the demand for metal as a store of value, gold’s rally had sputtered. Futures posted losses in seven of the past eight sessions, while signs of improving U.S. economy renewed speculation of increasing rates. Dialing back expectations, the Fed said economic and financial developments still pose risks.

Odds shrink

yellen rebound gold rates
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Gold futures for April delivery increased 2.9%, settling at $1,265 per ounce at 1:52 p.m on the Comex in New York. This ended four straight sessions of losses – the longest slump for a most-active contract since November 6. The BI Global Senior Gold Valuation Peers index climbed 4.2%.

Vancouver-based Teck Resources rose 16%, which was the biggest advance on the Bloomberg World Mining Index. Phoenix-based Freeport added 6% among the best performances on the Standard & Poor’s 500 Index of equities.

According to a Wednesday’s statement following a two-day meeting, the Fed kept the target range for the benchmark rate at 0.25 – 0.5%. Policy makers updated their projections to imply two quarter-point increase this year, down from the December’s four. Odds of an interest-rate increase in June fell to 37% from 54%.

yellen rebound gold copper miners
Image credit: Bloomberg

For the second day in a row, investors increased holdings in exchange-traded funds backed by metal. According to the data compiled by Bloomberg on Wednesday, the total jumped 0.2% to 1,738.3 metric tons.

“The Fed was more dovish than the market expected, and we’ve seen market expectations of the Fed rate move pushed back,” said Grant Sporre, an analyst at Deutsche Bank AG in London. “Gold is no longer going to $1,000, and the longer the Fed stays dovish, the better for the metal.”

In other metals

On the Comex in New York, silver and copper futures climbed, while platinum and palladium advanced on the New York Mercantile Exchange. All six main metals were traded on the London Metal Exchange, but zinc led the way, climbing 5%.

[Featured image credit: Mary F. Calvert]

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