Gold

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Miner Freeport-McMoRan Inc., the world’s largest publicly traded copper producer, announced its second-quarter earnings Wednesday.

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The miner reported Q2 net income attributable to common stock of $869 million and $1.6 billion for the first six months of the calendar year. The figures compare with $268 million in Q2 2017 and $496 million for the first six months of 2017.

The miner reported copper sales of 989 million pounds in Q2 (1.982 billion pounds through the first half of the year). The miner, also a producer of gold, reported gold sales of 746,000 ounces in Q2 (1.345 million ounces through the first six months). In addition, Freeport reported sales of 24 million pounds of molybdenum (48 million pounds through the first six months).

“Our second quarter results reflect strong performance from our global operations and a continued focus on productivity, cost management and capital discipline,” President and CEO Richard C. Adkerson said. “During the first half of 2018, we generated $2.7 billion in cash flow from operations and capital expenditures totaled $0.9 billion, enabling further strengthening of our balance sheet and advancement of initiatives to build value for FCX shareholders.

“We achieved important progress during the quarter to reach a new long-term partnership structure with the Indonesian government, and we remain focused on completing negotiation and documentation of definitive agreements to restore long-term stability for our Grasberg operations.”

The miner’s share price dipped Wednesday, Bloomberg reported, as a result of operational issues at its Grasberg mine in Indonesia. After hitting $16.43 in the early part of the day, the price dropped 6.4% to $15.06 around noon. It rallied the rest of the day, closing at $15.86 (down 1.37% for the day).

In addition, the miner reported paying off $454 million in debt in April.

Copper Price Slumps

As a major copper producer, Freeport-McMoRan is eyeing the copper market’s recent slide.

The LME copper price has been falling fast since early June. After hitting $7,271.50 on June 8, the copper price proceeded to drop 17.6% and even dipping below $6,000/mt on July 17.

The price then bounced back slightly, moving to $6,166.50 as of July 24.

Source: LME

Adkerson referred to the slide in the copper price in tandem with the trade measures currently being undertaken by the U.S., in particular vis-a-vis China (the world’s top copper consumer).

As we sit here today, there is an anomaly between market sentiment and fundamentals in the marketplace,” Adkerson said. “We’re continuing to see real demand being very positive for our global business, including our business in China.”

Adkerson added that copper demand in the future will benefit from renewable-energy projects and electric vehicles.

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“Absent having some sort of global recession or a major setback in China, market deficits in copper appear to be inevitable,” Adkerson added.

Stock markets in New York, London and Shanghai have been sliding for a month now since President Donald Trump unleashed a trade war on the U.S.’s trading partners in an effort to reset terms seen as unfair by Washington.

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Normally, as stock markets slide and tensions rise, you would expect to see the gold price rise; the precious metal is considered a safe-haven asset because it retains or increases value during market turbulence.

Gold is often sought after by investors through economic uncertainty in order to limit their exposure to losses in other assets. Yet, currently gold is at or near a seven-month low, according to Reuters. According to the Singapore Business Times, for the first time in two years, Schroders has cut its global growth forecast for 2018 and 2019, citing rising oil prices and the uncertainty over trade relations that could drag on business decisions to hire and invest (particularly for exporters).

Source: TradingView

So, why isn’t gold playing ball?

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This morning in metals news, oil and gold prices opened slightly lower despite the missile attacks on Syria that took place early Saturday morning local time. NAFTA renegotiation talks speed up in face of Mexico’s upcoming presidential election.

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Oil, Gold Traded Lower Following Syria Strikes

Oil and gold prices have not yet spiked following the missile attacks that the United States, Britain and France launched on Syria over the weekend, instead trading slightly lower when markets reopened, according to Reuters.

“Gold has benefited in recent days as a safe-haven asset amid a U.S.-China trade dispute and the escalating conflict in Syria, which also pushed oil above $70 a barrel because of concerns about a spike in Middle Eastern tensions,” Reuters’ Jan Harvey and Jessica Resnick-Ault wrote.

The LME’s Aluminum Woes

The London Metal Exchange’s decision to no longer accept aluminum from Russian producer Rusal has led to a scramble to withdraw non-Russian metal from the LME’s warehouses, the Financial Times reported. Buyers have also been in a bind to find alternative sources of aluminum. Read more

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This morning in metals news, copper hits an over one-week high, President Trump is pushing for a preliminary deal on the North American Free Trade Agreement (NAFTA) by mid-April and gold could reach $1,400 if a trade war ensues.

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Copper Surges

Strong manufacturing growth in China powered the copper price to its highest level in over a week, Reuters reported.

After a sluggish March for LME copper, it jumped 1% Tuesday to $6,777/mt, according to the report.

NAFTA Deal This Month?

Canada, Mexico and the U.S. have now gone through seven rounds of renegotiation talks focused on NAFTA, the 24-year-old trilateral trade deal.

According to a Bloomberg report, President Trump wants to reach a preliminary deal on NAFTA by mid-April.

Ambitious timelines for a NAFTA conclusion have been heard before, particularly last fall when the U.S. negotiating team expressed a desire to close on a deal before the end of the 2017 calendar year. According to the Bloomberg report, the countries still remain far apart on some issues. So, for now, a deal within the next couple of weeks, while not impossible, might be seen as improbable.

Gold Could Soar if Trade War Kicks Off

The precious metal could jump over $1,400/ounce if a trade war starts, according to Rick Rule, CEO of Sprott U.S Holdings Inc., Bloomberg reported.

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Spot gold traded at $1,337.50 on Tuesday, according to the report.

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This morning in metals news, China’s scrap steel exports surged last year, two popular American non-metal products could be affected by steel and aluminum tariffs, and a miner of gold and silver looks to get into copper and zinc.

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Chinese Scrap Steel Exports Jump in a Big Way

Scrap steel exports from China amounted to 2.2 millions tons in 2017, according to a Reuters report citing the Xinhua news agency.

Bourbon, Cheese Getting Caught in a Hypothetical Trade War?

As President Donald Trump mulls steel and aluminum tariffs — as part of the Department of Commerce’s Section 232 probes — many have pondered if such tariffs would mark the start of a new trade war.

According to a report by NPR, Kentucky bourbon and Wisconsin cheese could be affected in such a trade war. While China is often the primary focus of the 232 discussion, according to the report European allies are warning of possible retaliation.

Hochschild Looks to Get Into Copper, Zinc

Hochschild, a miner of gold and silver, is interested in moving into other sectors, like copper and zinc, according to a Reuters report.

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Gold and silver will continue to buy the miner’s top priority, according to the report.

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This morning in metals, several companies are looking to buy the distressed Essar Steel India Ltd., copper prices bounced back up and gold prices are up.

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Essar Steel on the Market

Companies like ArcelorMittal and VTB Group are vying for embattled Indian firm Essar Steel, according to a Bloomberg report.

Essar is the largest Indian firm going through the country’s insolvency proceedings, according to the report.

Copper Prices on the Way Up

Prices of the metal picked up Monday after hitting two-month lows last week, according to Reuters.

The price picked up on account of a weaker U.S. dollar and more stable global markets, according to the report.

Gold Prices Rise

Prices of the precious metal picked up on Monday, according to Reuters, but inflation data due Wednesday could put a lid on the rise.

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The spot gold price hit $1,318.54/ounce as of 1329 GMT on Monday, according to the report.

The Global Precious MMI (Monthly Metals Index) picked up one point this month, rising to 92 for our February reading.

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Within the basket of metals, Chinese gold bullion and U.S. silver ingot/bars picked up in price. Palladium, which has bucked the historical trend by trading higher than platinum for several months now, dropped in price. Palladium still traded higher than platinum as of Feb. 1.

Palladium on the Decline

The U.S. palladium bar price moved past the platinum price last year, hitting $928/ounce as of Oct. 1 compared with $910/ounce for platinum.

This month, palladium dropped 5.8% month over month, while platinum picked up 6.2%. All in all, it seems as if the markets for the two platinum-group metals (PGMs) are moving toward the historical dynamic.

As reported by Kitco News, the palladium price has fallen three weeks in a row. Palladium’s run of trading at a premium to platinum may be coming to an end — that will be something to keep an eye on going forward.

Gold Futures Fall to 1-Month Low

One might have thought that this week’s massive equities selloff — resulting in the Dow’s biggest-ever intraday drop — would have offered support for gold, the safe-haven metal turned to in times of volatility. (VIX, the index tracking volatility, spiked on Monday and early Tuesday, in tandem with the selloff.)

The VIX index over the last month, showing the spike beginning Monday, Feb. 5, and peaking the morning of Feb. 6. Source: Chicago Board Options Exchange

However, the selloff did not seem to benefit gold. According to a MarketWatch report, gold futures hit a one-month low on Wednesday.

As of Feb. 6, the U.S. gold bullion price was $1,339/ounce, according to MetalMiner IndX data.

Gold and China

Speaking of gold, interest in the metal is picking up in China, Bloomberg reported, as a “property boom” in the country has injected life into the consumer market for the precious metal.

On the other hand, the global supply of gold plateaued last year, according to the Financial Times, and China’s output fell by 9% in 2017. According to the same report, global gold output had picked up every year since 2008 (until this past year).

Gold demand picked up in Q4 2017, according to the World Gold Council, but still declined by 7% in 2017.

“It’s not surprising to see overall gold demand down given the backdrop of monetary policy tightening and strong equity markets in 2017, but the market is not in bad shape,” said Alistair Hewitt, head of market intelligence at the World Gold Council, in a prepared statement. “The US dollar gold price was up 13% and institutional investors, especially in Europe, continued to add gold to their portfolios as a hedge against frothy asset prices and geopolitical uncertainty. Jewellery demand picked up as economic conditions improved in China and a policy change in India removed a barrier to demand, while next-generation smartphones boosted gold demand from technology companies.”

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Actual Metal Prices and Trends

The U.S. silver ingot/bar price rose 0.9% month over month to $17.305/ounce as of Feb. 1. The U.S. platinum bar price rose 6.2% to $1,000/ounce, while the U.S. palladium bar price dropped 5.8% to $1,023/ounce.

The Chinese gold bullion price rose 2.4% to $43.55/gram. The U.S. gold bullion price ticked up 2.1% to $1,345/ounce.

Before we come to the end of the first business week of 2018, let’s look back at some of the stories on MetalMiner so far this year:

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  • Chinese supply-side reforms generally have a big impact on metal prices — such was the case for copper, as our Stuart Burns wrote early this week.
  • In case you missed it, the fourth episode of our podcast series, Manufacturing Trade Policy Confidential, dropped this week. This time, we spoke with Heidi Brock, CEO of the Aluminum Association.
  • With 2018 just under way, many publications are making predictions for the year with respect to the markets and how they will perform (among other things). Burns rounded up some of the predictions being made for the year, ranging from the political to the economic.
  • After a solid 2017, Tata Steel has big plans for 2018, Sohrab Darabshaw writes.
  • Speaking of supply-side actions, Burns touched on oil output cuts led by OPEC.
  • We kicked off our monthly round of Monthly Metals Index (MMI) posts with the Automotive MMI.
  • Gold and Bitcoin, in terms of finance, sit on opposite ends of the spectrum, with the former representing tradition and the latter representing the rise of modern cryptocurrencies. However, their relative fortunes are more connected than you might think, Burns writes.
  • For our second MMI post, we surveyed the month in construction trends and prices.

Free Sample Report: Our Annual Metal Buying Outlook

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Gold has defied interest rate rises and record equity markets to rally to its highest level in more than three months, the Financial Times reported this week.

Rising more than 6% since early December to over $1,300/ounce — its highest level, the paper reports, since September 2015.

Benchmark Your Current Metal Price by Grade, Shape and Alloy: See How it Stacks Up

Gold is normally considered a safe-haven asset and a store of wealth in times of financial stress and uncertainty. So, why the surge in demand?

Performance of the U.S. Dollar

The U.S. and Europe are both expanding and emerging market growth is set to top 5% this year. One theory is the weakness of the U.S. dollar — as the dollar falls, all commodities priced in the currency become relatively cheaper and therefore more attractive to buyers in other currencies.

The dollar has been the worst performer of the G10 currencies in 2017, falling some 10% over the year. Investors also have expectations of higher inflation in the U.S. due to President Donald Trump’s tax reforms and a rising oil price, which often stokes inflation is seen by some as a risk. But while the dollar is attributed with the majority of the rise in gold, it may not be the whole story.

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This morning in metals news, Chinese steel futures start the year on the right foot, the automotive sales outlook for 2018 is not quite as bright as it has been in recent years and gold reaches a three-month high.

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Chinese Steel Futures Start ’18 Strong

Chinese steel futures started the year on the right foot, according to a Reuters report.

With that said, the report cites concerns about consumption levels of the metal going forward, particularly as the winter season sees construction activity slow down in China.

Outlook for Auto Sales Less Positive

After a record 2016 and strong 2017 in automotive sales, it wouldn’t be surprising to see the market take a step back in 2018.

According to Bloomberg, higher interest rates could dim the prospects of the automotive market in 2018.

Good as Gold

Gold, meanwhile, hit a three-month high on the heels of a solid December, Reuters reported.

Free Sample Report: Our Annual Metal Buying Outlook

According to Reuters, the metal rose 4.4% in the last three weeks of 2017, with prices eclipsing the $1,310/ounce mark.

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