Market recap: Gold's slump, copper's surge, and the Fed's influence

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by Glenn Dyer

Did we miss the copper party? Was gold’s surge last week just another flash in the pan? Was the Fed the catalyst for the sell-off in metals—or did traders realize that the boomlet was built on clay and easily undermined by a US central bank that seems to be getting a little cranky about "sticky inflation"?

Gold ended at $US2,335.20 (up just $US2) on Friday, but that left it down sharply for the week: 3.50% over the five days and close to 5% from its peak of $US2,454 an ounce on Monday.

US 10-year bond yields ended around 4.47%, up 4.40 basis points for the week, and the US dollar ended up 0.3% after it eased late Friday. The Aussie dollar ended at 66.26, hanging on to that level despite the frenetic trading in gold, copper, and shares over the week.

The jump in the US dollar and rise in US bond yields were a nasty reminder for the gold bulls that those two prices matter more than silly stories about a shortage of metal, which was really a conflict between shorts trying to exit their positions and running into a lot of longs who showed no mercy for a session or two.

Copper surged to $US5.19 a pound on Comex and well over $US11,000 a tonne on the London Metal Exchange, and then the boom was gone after the minutes of the last Fed grumped about inflation in the minutes of the early May meeting and down it went (helped by a strong business activity survey for the US for May, and then strong durable goods orders for April, which rose rather than slid as predicted).

Analysts say there’s more a surplus of nearly 400,000 tonnes of global supply over demand with stocks in China at high levels as refiners and smelters hoard metal because of a continuing shortage of concentrates to process.

Copper lost 6.3% for the week, ending at $US4.7590 an ounce at Friday’s close—which was also off 8.4% from that all-time high on Monday and back to levels in early May.

The rise in the value of the greenback, rise in US bond yields also hit copper—but not as hard as they hit gold.

The slide in silver steadied—it ended at $US30.54 an ounce, up 0.3% on Friday, but that close was down nearly 4% for the week.

Gold saw the first weekly fall in three weeks and with the next batch of key US inflation data due Friday, the metal will trade cautiously until the release of those figures late Friday night, Sydney time.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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