Evening Track : Gold Steady Amid Trade Tensions, Crude Holds After Iran Sanctions - Kotak Securities Ltd
Comex Gold stabilized around $2,955/oz, near record highs, driven by safe-haven demand amid escalating trade tensions. Meanwhile, Trump's tariff policies on Canada and Mexico, coupled with rising US economic concerns, accelerated expectations for Fed easing. Swap markets now anticipate a rate cut two months sooner. SPDR Gold Trust holdings reached a near-yearly high, reflecting strong investor interest. Now the focus shifts to Friday's PCE report, a critical inflation gauge which projected to show slower growth, persistent pressures may temper Fed rate cut expectations. Further, Trump's actions against China heightened geopolitical risks. Moreover,gold also benefited from declining Treasury yields, fueled by robust demand in the two-year note auction and weak US business activity data
WTI crude stabilized around $70.70/bbl, influenced by new U.S. sanctions targeting Iranian oil transport and renewed tariff threats against Canada and Mexico. The U.S. aims to eliminate Iran's crude exports, a significant factor given Iran's position as OPEC's third-largest producer, with January output at 3.2 million bpd. Singapore refinery margins, processing Dubai crude, improved to $3.50/bbl in February, up from $2.30/bbl in January, according to LSEG data. However, price gains were limited by demand uncertainty and the absence of fresh economic data from China, a major oil consumer.
LME metals faced declines amid waning market sentiment driven by US restrictions on Chinese investments, impacting both raw materials and equities. LME Copper and aluminum experienced 0.4% drops, settling at $9,474.50 and $2,642.0 per ton, respectively. In China, substantial supply persists, evidenced by negative treatment charges for smelters, indicative of refined copper overcapacity. Chinese copper inventories surged past 260,000 tonnes, tripling year-start levels, while bonded stocks doubled to 33,000 tonnes. Aluminum also experienced a third-day decline, retracing from recent highs. US actions targeting Chinese technology and energy investments further suppressed Chinese market confidence, critically influencing metal demand, as China remains a dominant consumer.
Henry Hub natural gas futures are experiencing a moderate rebound following a sharp 5.60% decline, driven by revised warmer US temperature forecasts for early March. This shift signals a potential end to the recent cold snap that propelled prices to a two-year high. Despite this, underlying supply tightness remains a supportive factor, with EIA inventories 5.3% below the 5-year average. Dry gas production is stable, while demand and LNG exports show modest growth. Increased electricity output further bolsters natural gas demand. Long-term bullish factors include the Trump administration's renewed focus on LNG export projects, potentially boosting demand. Recent EIA data revealed a larger-than-expected inventory draw, emphasizing tight supplies. European gas storage also remains below the 5-year average.
Today, investors will focus on CM Consumer confidence, which is a leading indicator of consumer spending and S&P/CS Home price data offering insightsinto property price trend. Richmond Manufacturing Index will provide level of business conditions including shipments, new orders, and employment.
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