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Commodities

Gold snaps five-week win streak, but bull run not over yet: MS

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Investing.com — Gold snapped a five-week wining streak Friday, but the yellow metal’s bullish run likely isn’t over yet as tailwinds including central bank demand have more room to go just as the tide of outflows from gold exchange traded funds are starting to turn.  

Gold prices rose 0.3% to $2,348.75, but took heavy losses earlier this week following easing Middle East tensions after Iran-Israel showed little appetite to escalate their tit-for-tat exchange.  

The path ahead for gold prices is set to be choppy but likely leans toward higher highs, rather than a reversal, Morgan Staley said, forecasting the odds are more in favor of its bull case scenario, which sees gold rising to $2,760 an ounce in the second half of the year, rather than its bear case scenario of a fall to $2,000 an ounce.

The strength in the demand for the yellow metal has provided it with extra clout to withstand the weight of rising real interest rates, which have a long history of hampering investor appetite for non-interest bearing assets like gold.

Gold is typically expected to have a “negative correlation with real yields, given it loses relative competitiveness in investor portfolios as real yields rise,” Morgan Stanley said, but is now showing a positive correlation with real yields on a 3-month basis as fundamental drivers have been dominating price action.  

Central bank purchases of bullion, led by People’s Bank of China, demand for safe havens amid rising geopolitical tensions, and growing demand for an inflation hedge have helped kept gold on the up, and up.

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These bullish factors, particularly central bank buying, aren’t likely to disappear anytime soon. 

Gold consumption in China rose 5.94% from a year earlier to 308.91 tons in the first quarter of the year, China Gold Association said Friday, driven by soaring safe-haven demand.

The PBoC bullion purchases continued for a 17th straight month in March, taking its total gold reserve to 2,262.67 tons by the end of Q1, according to the China Gold Association.

Meanwhile, ETF demand has been weak throughout gold’s rally as outflows have continued, but the tide of outflows are “starting to turn,” Morgan Stanley said.

U.S. and Asia ETFs have seen inflows since mid-March, according to the World Gold Council, but that has been offset by outflows in Europe.

While these fundamental positive drivers show no sign of cooling, the macroeconomic outlook, in which U.S. inflation appears to be more sticky, keeping rates higher for longer, has some doubting gold’s next move higher. 

“But if data stays strong, driving concerns of more sticky inflation, as well as elevated geopolitical risk, gold may stay well bid regardless,” Morgan Stanley said, adding that if a rate-cut is brought forward that is often another positive catalysts for gold.   

Commodities

Gold and silver to continue to appreciate – Julius Baer

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Investing.com – With another day of gains in and futures, the Swiss group Julius Baer has decided to change its outlook on commodities to constructive. The group now believes that both metals have the potential for further increases, as stated in a note sent to clients and the market on Friday morning.

The group mentioned that, in addition to U.S. monetary policy, the gold market is still dominated by Asia. “We have to recognize that the region’s willingness to pay for gold as a hedge against economic and geopolitical risks appears even greater than we expected,” said Carsten Menke, head of next-generation research at Julius Baer.

Weaker-than-expected U.S. economic data have revived hopes for interest rate cuts by the Federal Reserve (Fed, the U.S. central bank), boosting gold and silver prices. This could “be the missing incentive for safe-haven seekers in the Western world to return to the markets,” he added.

Central Bank Purchases in Focus

Central banks have been buying gold more for geopolitical reasons than economic ones, according to Julius Baer. In China, for example, there is a desire to reduce dependence on the U.S. dollar – important for avoiding potential sanctions.

The People’s Bank of China is believed to be responsible for at least 30% to 50% of all central bank purchases over the past two years. Although it shows signs of being price-sensitive, “its willingness to pay has increased as gold prices rise,” notes Julius Baer. It is expected that other monetary authorities will follow the same steps, moving away from the U.S. dollar.

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Commodities

Goldman Sachs discusses what’s next for natural gas prices

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Over the past three weeks, US prices have surged 30% to above $2.50 per million British thermal units (mm/BTU), fueled by production declines and increased feedgas demand for liquified natural gas (LNG) exports.

Moreover, recent producer cuts, maintenance events, and Freeport LNG’s normalization of gas demand post-outage have contributed to this rise. Cheniere’s announcement of no heavy maintenance for its liquefaction trains this year also supports higher prices.

In a Thursday note, Goldman Sachs strategists said the return of gas prices above $2/mmBtu aligns with their expectations, as production curtailments “would ultimately lead to lower storage congestion risks for this summer.”

“That said, we see only limited further upside from current levels, with stronger gas prices risking a return of congestion concerns,” they added.

Goldman notes that prices above $2/mmBtu reduce gas competitiveness compared to coal, with a $0.50/mmBtu increase potentially cutting gas demand by 1 billion cubic feet per day (Bcf/d), especially in shoulder months.

Moreover, higher prices may prompt the restart of previously shut-in wells. EQT (ST:), the largest producer in the Appalachia region, indicated it would resume production if prices sustainably exceed $1.50/mmBtu. And while Appalachia prices haven’t risen as much as NYMEX, the local hub has averaged $1.44/mmBtu month-to-date, up 10¢ from last month, strategists highlighted.

Elsewhere, European gas prices have also risen this summer, though less sharply than in the US.

Title Transfer Facility (TTF) prices increased 18% over the past three months to around 30 euros per megawatt-hour (MWh), holding steady in May.

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However, unlike the US market, this rally lacks fundamental support, with Northwest (NW) European gas storage at record-high levels, Goldman strategists pointed out.

“To be sure, NW European LNG imports have remained weak relative to last year – and are likely to get weaker in the coming weeks owing to a seasonal decline in global LNG production, exacerbated by outages at Australia’s Gorgon export project,” they said.

“Going forward, we expect healthy non-European demand for LNG to continue to incentivize a decline in European LNG imports vs last year,” they continued.

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Commodities

Gold prices trim some weekly gains on tempered rate cut hopes

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Investing.com– Gold prices fell slightly on Friday, trimming some of their gains for the week as comments from a slew of Federal Reserve officials offered a more sobering outlook on interest rate cuts. 

The yellow metal had risen to nearly $2,400 an ounce this week in the immediate aftermath of some soft U.S. economic readings. But it pulled back from these levels on Thursday and Friday.

steadied at $2,377.40 an ounce, while expiring in June fell slightly to $2,381.10 an ounce by 00:19 ET (04:19 GMT). 

Gold retreats as Fed officials downplay rate cuts, but weekly gains due

The yellow metal fell on Thursday after a string of Fed officials cautioned against bets on immediate reductions in interest rates. 

Several members of the central bank’s rate setting committee said the central bank will need much more convincing that inflation was coming down beyond a marginally soft inflation reading for April. 

This saw traders begin pricing out some expectations for a rate cut in September. The and also rebounded from earlier losses this week. 

Still, some softer-than-expected readings put gold on course for a 0.7% weekly gain. 

The yellow metal was also in sight of a record high of above $2,430 an ounce, although it appeared unlikely the level would be met in the near-term. 

Other precious metals retreated on Friday, but were set for bumper weekly gains. fell 0.2% but were trading up 6.2% for the week, while fell 0.4% but were up 4.5% this week. 

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Copper mixed amid middling China cues

Among industrial metals, one-month copper futures tumbled from two-year highs tracking middling economic data. But three-month copper futures pushed higher and were set for a stellar week as markets bet on tighter supplies and an eventual demand recovery in the coming months. 

on the London Metal Exchange rose 0.6% to $10,445.0 a ton, while rose 0.3% to $4.8935 a pound. 

Data from China on Friday painted a mixed picture of the economy. While grew more than expected, growth slowed and shrank at an accelerated pace. Growth in Chinese also slowed.

The readings presented a muddled outlook for the world’s biggest copper importer, as it rolled out more stimulus measures to shore up growth.

Three-month copper futures gained on the prospect of a demand recovery, and were up nearly 4% this week. They were also at two-year highs. 

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