Spot gold prices fell for fifth straight session yesterday, registering their biggest one day drop in almost two months as investors positioned themselves ahead of today’s ADP employment change and trade balance data. Market participants are hopeful that any bullish surprises will give the Federal Reserve enough confidence in the economic outlook and gear markets for the possibility of an interest rates rise in December. Spot prices for the precious metal closed 1.4% lower yesterday and are down over six percent from their October peak around $1,192/oz. Activity this morning has seen the yellow metal stabilise around yesterday’s close as spot prices struggle with resistance around $1,120/oz early on.
Chinese mainland stock indices rallied strongly overnight with the Shanghai Composite and CSI 300 both registering gains in excess of four percent as the government unveiled the details of its latest five year plan. President Xi Jinping stated late on Tuesday that a minimum annual GDP target of 6.5% would need to be realised in order to double 2010 GDP and per capita income by 2020. Further details regarding Beijing’s efforts to change its currency management policy and measures to increase yuan convertibility were seen as encouraging signs triggering the increasing openness of the Chinese economy. LME base metals prices received a lift as risk appetite improved with three month copper prices leading the pack higher, up 1.1% from yesterday’s close as the red metal traded towards $5,185/tonne.
ICE raw sugar futures extended gains towards 15.5 cents per pound yesterday as a combination of persistent rain in Brazil and increasing fuel costs in the world’s second largest producer increased the prospects of more cane crop being directed towards ethanol production. Inclement weather in Brazil could shorten the harvesting time for the cane crop with the outlook prompting a near seven percent rally over the past two days, pushing contracts for March delivery to a nine month high. With analysts forecasting a deficit this year for the first time since the 2009/2010 crop we could experience further upside pressure in the near term as further details emerge.